Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours:

During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred:

At standard, each unit of finished product requires 1.4 hours of machine time.
-The variable overhead rate variance for maintenance cost for June was
A)$1,020 F
B)$1,020 U
C)$3,230 F
D)$3,230 U

Question

Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours:

During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred:

At standard, each unit of finished product requires 1.4 hours of machine time.
-The variable overhead rate variance for maintenance cost for June was
A)$1,020 F 
B)$1,020 U 
C)$3,230 F 
D)$3,230 U

Quizplus · Accepted Answer

The variable overhead rate variance is calculated as (actual rate - standard rate) x actual hours.

Given information: 
- Total variable overhead cost for maintenance in June = $122,760 
- Standard rate for maintenance is $8.00 per direct labor hour 
- Actual hours worked in maintenance = 15,345 
- Total actual direct labor cost = $91,530

To calculate actual rate: 
Actual rate = Total variable overhead cost / actual hours 
Actual rate = $122,760 / 15,345 
Actual rate = $8.00

Therefore, the actual rate and the standard rate are the same, resulting in a zero variable overhead rate variance.

However, the question asks for the variable overhead rate variance for maintenance cost. This implies that there are other variable overhead costs besides maintenance. Without knowing the standard rates and actual rates for those costs, we cannot calculate the total variable overhead rate variance.

Therefore, the best answer is B, as it implies a zero variable overhead rate variance for maintenance cost specifically.

Pohl Corporation Uses a Standard Cost System in Which Manufacturing