Smollett Manufacturing Company has a standard variable overhead rate of $5 per machine hour, with each completed unit expected to take three machine hours to produce. A review of the company's accounting records found the following: Actual production: 19,500 units
Variable-overhead efficiency variance: $9,000U
Variable-overhead spending variance: $21,000F
What was Smollett's actual variable overhead during the period?

Question

Quizplus · Accepted Answer

The actual variable overhead can be calculated by adjusting the standard cost for the variances. The standard cost for the actual production is 19,500 units * 3 hours/unit * $5/hour = $292,500. The efficiency variance is $9,000 unfavorable, so we add this to the standard cost: $292,500 + $9,000 = $301,500. The spending variance is $21,000 favorable, so we subtract this from the adjusted cost: $301,500 - $21,000 = $280,500.

Smollett Manufacturing Company Has a Standard Variable Overhead Rate of $5