Majer Corporation makes a product with the following standard costs: The company reported the following results concerning this product in February.
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 February is:
A) $191 Unfavorable
B) $191 Favorable
C) $196 Unfavorable
D) $196 Favorable

Question

Majer Corporation makes a product with the following standard costs:  The company reported the following results concerning this product in February.
 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 February is:
A) $191 Unfavorable 
B) $191 Favorable 
C) $196 Unfavorable 
D) $196 Favorable

Quizplus · Accepted Answer

To find the variable overhead rate variance, we need to multiply the actual hours worked by the difference between the actual variable overhead rate and the standard variable overhead rate:

Actual variable overhead rate = $3,940 ÷ 980 = $4.00 per hour
Standard variable overhead rate = $3.80 per hour
Actual hours worked = 960

Variable overhead rate variance = (Actual hours worked x (Actual rate - Standard rate))
= (960 x ($4.00 - $3.80))
= $192

Since the actual variable overhead rate was $0.01 lower than the standard rate, the variance is favorable. Therefore, the correct answer is B) $191 Favorable.

Majer Corporation Makes a Product with the Following Standard Costs