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15 November, 00:00

Doogan Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 8.3 grams $ 2.90 per gram Direct labor 0.4 hours $ 29.00 per hour Variable overhead 0.4 hours $ 7.90 per hour The company produced 6,100 units in January using 40,210 grams of direct material and 2,470 direct labor-hours. During the month, the company purchased 45,300 grams of the direct material at $2.60 per gram. The actual direct labor rate was $28.30 per hour and the actual variable overhead rate was $7.70 per hour. 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 variable overhead rate variance for January is:

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  1. 15 November, 03:12
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    Manufacturing overhead rate variance = $494 favorable

    Explanation:

    Giving the following information:

    Variable overhead 0.4 hours $ 7.90 per hour

    The company produced 6,100 units in January using 2,470 direct labor-hours.

    The actual variable overhead rate was $7.70 per hour.

    To calculate the variable overhead rate variance, we need to use the following formula:

    Manufacturing overhead rate variance = (standard rate - actual rate) * actual quantity

    Manufacturing overhead rate variance = (7.9 - 7.7) * 2,470

    Manufacturing overhead rate variance = $494 favorable
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