Zennick Fashion Products uses standard costs for their manufacturing division. Standards specify 3.0 direct labor hours per unit of product. At the beginning of the year, the static budget for variable overhead costs included the following data:
$$\begin{array}{l}
\begin{array} { l l }
\text { Production volume: } & 1,000 \text { units } \
\text { Estimated variable overhead costs: } & \$ 120,000 \
\text { Estimated direct labor hours: } & 3,000 \text { hours }
\end{array}\
\text { At the end of the year, actual data were as follows: }\
\begin{array} { l l }
\text { Production volume: } & 1,500 \text { units } \
\text { Actual variable overhead costs: } & \$ 174,300 \
\text { Actual direct labor hours: } & 4,200 \text { hours }
\end{array}
\end{array}$$
- How much is the standard price per hour for variable overhead?

Question

Zennick Fashion Products uses standard costs for their manufacturing division. Standards specify 3.0 direct labor hours per unit of product. At the beginning of the year, the static budget for variable overhead costs included the following data:
$$\begin{array}{l}
\begin{array} { l l } 
\text { Production volume: } & 1,000 \text { units } \
\text { Estimated variable overhead costs: } & \$ 120,000 \
\text { Estimated direct labor hours: } & 3,000 \text { hours }
\end{array}\
\text { At the end of the year, actual data were as follows: }\
\begin{array} { l l } 
\text { Production volume: } & 1,500 \text { units } \
\text { Actual variable overhead costs: } & \$ 174,300 \
\text { Actual direct labor hours: } & 4,200 \text { hours }
\end{array}
\end{array}$$
- How much is the standard price per hour for variable overhead?

Quizplus · Accepted Answer

The standard price per hour for variable overhead is calculated by dividing the estimated variable overhead costs by the estimated direct labor hours. Thus, $120,000 / 3,000 hours = $40.00 per direct labor hour.

Zennick Fashion Products Uses Standard Costs for Their Manufacturing Division