Epley Corporation makes a product with the following standard costs:

In July the company produced 3,300 units using 12,240 pounds of the direct material and 2,760 direct labor-hours. During the month, the company purchased 13,000 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $51,612 and the actual variable overhead cost was $20,148.

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 July is:
A)$1,932 U
B)$1,932 F
C)$1,848 U
D)$1,848 F

Question

Epley Corporation makes a product with the following standard costs:

In July the company produced 3,300 units using 12,240 pounds of the direct material and 2,760 direct labor-hours. During the month, the company purchased 13,000 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $51,612 and the actual variable overhead cost was $20,148.

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 July is:
A)$1,932 U 
B)$1,932 F 
C)$1,848 U 
D)$1,848 F

Quizplus · Accepted Answer

The variable overhead rate variance is calculated as the difference between the actual variable overhead rate and the standard variable overhead rate, multiplied by the actual level of production. In this case, the actual variable overhead rate is $1.932 per direct labor hour, the standard variable overhead rate is $1.848 per direct labor hour, and the actual level of production is 1,000 direct labor hours. Therefore, the variable overhead rate variance is ($1.932 - $1.848) * 1,000 = $1,932 F.

Epley Corporation Makes a Product with the Following Standard Costs