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7 June, 17:57

Shawl Corporation's variable overhead is applied on the basis of direct labor-hours. The standard cost card for product F02E specifies 5.5 direct labor-hours per unit of F02E. The standard variable overhead rate is $6.80 per direct labor-hour. During the most recent month, 1,560 units of product F02E were made, and 8,700 direct labor-hours were worked.

The actual variable overhead incurred was $52,635.

Required:

a. What was the variable overhead rate variance for the month?

b. What was the variable overhead efficiency variance for the month?

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Answers (1)
  1. 7 June, 20:23
    0
    (a) $6,525 (b) $816

    Explanation:

    Solution

    Given that:

    (a) The variable overhead rate variance for the month:

    The variable overhead rate variance = (Actual rate - Standard rate) * Actual hours

    = (($52,635/8700) - $6.80) * 8,700 hours

    = ($6.05-$6.80) * 8,700 hours

    = $6,525 Favorable

    (b) The variable overhead efficiency variance for the month:

    The variable overhead efficiency variance = (Actual hours - Standard hours) * Standard rate

    = (8,700 Hours - (1,560 units * 5.5 Hours/Unit)) * $ 6.80

    = (8,700 Hours - 8,580 Hours) * $6.80

    = $816 Which is unfavorable
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