Valera Corporation makes a product with the following standards for labor and variable overhead:
The company budgeted for production of 5,300 units in July, but actual production was 5,400 units. The company used 2,130 direct labor-hours to produce this output. The actual variable overhead rate was $6.10 per hour. The company applies variable overhead on the basis of direct labor-hours.
-The variable overhead rate variance for July is:
A) $213 F
B) $216 F
C) $216 U
D) $213 U

Question

Valera Corporation makes a product with the following standards for labor and variable overhead:
  The company budgeted for production of 5,300 units in July, but actual production was 5,400 units. The company used 2,130 direct labor-hours to produce this output. The actual variable overhead rate was $6.10 per hour. The company applies variable overhead on the basis of direct labor-hours.
-The variable overhead rate variance for July is:
A) $213 F 
B) $216 F 
C) $216 U 
D) $213 U

Quizplus · Accepted Answer

Variable overhead rate variance = AH × (AR − SR)
= 2,130 hours × ($6.10 per hour − $6.00 per hour)
= 2,130 hours × ($0.10 per hour)
= $213 U

Valera Corporation Makes a Product with the Following Standards for Labor