Question

Vermeillen Corporation uses a standard costing system in which variable manufacturing overhead is assigned to production on the basis of the number of machine setups. The following data pertain to one month's operations:

Variable manufacturing overhead cost incurred: $70,000
Total variable manufacturing overhead variance: $4,550 Favorable
Standard machine setups allowed for actual production: 3,550
Actual machine setups incurred: 3,500
The variable overhead rate variance is:

$1,000 Favorable

$1,000 Unfavorable

$3,500 Unfavorable

$3,500 Favorable

2)

Kartman Corporation makes a product with the following standard costs:

Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit
Direct materials 6.5 pounds $ 7.00 per pound $ 45.50
Direct labor 0.6 hours $ 24.00 per hour $ 14.40
Variable overhead 0.6 hours $ 4.00 per hour $ 2.40
In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The labor rate variance for June is:

$1,890 F

$2,061 U

$2,061 F

$1,890 U

Answer 1

Answer:

1 ) Variable Overhead Rate Variance = ( SR - AR )* AH

                                                         = ( $21 - $20) 3,500

                                                        = $3,500 Favorable

2 ) Labor Rate =  ( SR - AR )* AH

                      =  ( $24 - $24.9) 2,290

                      =$2,061 U

Explanation:

TOTAL =  Standard cost - Incurred cost

Standard Cost = $70,000 + $4,550

                        = $74,550

Standard Rate = $74,550 / 3,550

                        = $21

cost incurred = AR * machine hours

cost per machine hour = $70,000/3,500

                                      =$20

2) Labor Rate =  ( SR - AR )* AH

                      =  ( $24 - $24.9) 2,290

                      =$2,061 U

AR = $57,021/2,290 = $24.9

AR = Actual Rate

SR = Standard Rate

AH = Actual hours