Bulluck Corporation makes a product with the following standard costs: The company reported the following results concerning this product in July.
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) $191 Unfavorable
B) $210 Unfavorable
C) $210 Favorable
D) $191 Favorable

Question

Bulluck Corporation makes a product with the following standard costs:  The company reported the following results concerning this product in July.
 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) $191 Unfavorable 
B) $210 Unfavorable 
C) $210 Favorable 
D) $191 Favorable

Quizplus · Accepted Answer

To calculate the variable overhead rate variance, we need to compare the actual variable overhead rate per direct labor hour to the standard variable overhead rate per direct labor hour.

Actual variable overhead rate = Actual variable overhead costs ÷ Actual direct labor hours 
= $35,700 ÷ 1,800 hours 
= $19.83 per direct labor hour

Standard variable overhead rate = Total standard variable overhead costs ÷ Total standard direct labor hours 
= ($44,000 ÷ 2,000 hours) 
= $22 per direct labor hour

Variable overhead rate variance = (Actual variable overhead rate - Standard variable overhead rate) x Actual direct labor hours 
= ($19.83 - $22) x 1,800 
= $191 Unfavorable

Therefore, the correct answer is A.

Bulluck Corporation Makes a Product with the Following Standard Costs