Vette Tie Corporation has developed the following manufacturing overhead standards to use in applying overhead to the production of its hand-painted silk ties.Manufacturing overhead at Vette is applied to production on the basis of standard direct labor-hours (DLHs). The above standards were based on an expected annual volume of 60,000 ties.The actual results for last year were as follows: What was Vette's variable overhead rate variance?
A)$2,800 Unfavorable
B)$13,200 Favorable
C)$16,000 Favorable
D)$68,000 Unfavorable

Question

Vette Tie Corporation has developed the following manufacturing overhead standards to use in applying overhead to the production of its hand-painted silk ties.Manufacturing overhead at Vette is applied to production on the basis of standard direct labor-hours (DLHs).  The above standards were based on an expected annual volume of 60,000 ties.The actual results for last year were as follows:  What was Vette's variable overhead rate variance?
A)$2,800 Unfavorable 
B)$13,200 Favorable 
C)$16,000 Favorable 
D)$68,000 Unfavorable

Quizplus · Accepted Answer

AH × AR = $880,000
Variable overhead rate variance = (AH × AR)- (AH × SR)
= ($880,000)- (64,000 hours × $14.00 per hour)
= $880,000 - $896,000
= $16,000 F

Vette Tie Corporation Has Developed the Following Manufacturing Overhead Standards