Vermeillen Corporation uses a standard costing system in which variable manufacturing overhead is assigned to production on the basis of the number of machine setups. The following data pertain to one month's operations:Variable manufacturing overhead cost incurred: $70,000Total variable manufacturing overhead variance: $4,550 FavorableStandard machine setups allowed for actual production: 3,550Actual machine setups incurred: 3,500The standard variable overhead rate per machine setup is:
A) $20.00
B) $21.30
C) $18.44
D) $21.00

Question

Quizplus · Accepted Answer

The standard variable overhead rate per machine setup can be calculated by first finding the standard variable manufacturing overhead cost incurred, then dividing by the standard machine setups allowed for actual production. Given a favorable variance of $4,550 and actual variable manufacturing overhead costs of $70,000, the standard cost would be $70,000 + $4,550 = $74,550. Dividing this by the standard machine setups allowed (3,550) gives a rate of $21.00 per setup.

Vermeillen Corporation Uses a Standard Costing System in Which Variable