Brummer Corporation makes a product whose variable overhead standards are based on direct labor-hours. The quantity standard is 0.1 hours per unit. The variable overhead rate standard is $8.00 per hour. In January the company produced 8,700 units using 910 direct labor-hours. The actual variable overhead rate was $7.90 per hour.The variable overhead rate variance for January is:
A) $91 Favorable
B) $87 Favorable
C) $91 Unfavorable
D) $87 Unfavorable

Question

Quizplus · Accepted Answer

The variable overhead rate variance is calculated as (Actual Rate - Standard Rate) x Actual Hours. Here, it is ($7.90 - $8.00) x 910 = -$0.10 x 910 = -$91, which is a $91 Favorable variance because the actual rate is less than the standard rate, indicating a cost saving.

Brummer Corporation Makes a Product Whose Variable Overhead Standards Are