The Maxit Corporation has a standard costing system in which variable manufacturing overhead is assigned to production on the basis of standard machine-hours. The following data are available for July:Actual variable manufacturing overhead cost incurred: $11,310Actual machine-hours worked: 1,600 hoursVariable overhead rate variance: $1,710 UnfavorableTotal variable overhead spending variance: $2,310 Unfavorable The standard number of machine-hours allowed for July production is closest to:
A) 1,600 hours
B) 1,700 hours
C) 1,300 hours
D) 1,500 hours

Question

Quizplus · Accepted Answer

The total variable overhead spending variance is the sum of the rate variance and the efficiency variance. Given the rate variance is $1,710 Unfavorable and the total spending variance is $2,310 Unfavorable, the efficiency variance is $600 Unfavorable. The efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. Solving for Standard hours gives approximately 1,500 hours.

The Maxit Corporation Has a Standard Costing System in Which