Elite Brand Company uses standard costs for their manufacturing division. Standards specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static budget for variable overhead costs included the following data: Calculate the variable overhead cost variance.

Question

Elite Brand Company uses standard costs for their manufacturing division. Standards specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static budget for variable overhead costs included the following data:  Calculate the variable overhead cost variance.

Quizplus · Accepted Answer

Variable overhead cost variance= Actual variable overhead cost - (Standard variable overhead rate x Actual number of direct labor hours)

Actual number of direct labor hours = 62,000/10,000 = 6.2 hours per unit
Standard variable overhead rate = $10 per direct labor hour

Actual variable overhead cost = $652,500
(0.1 x $10 x 62,000) = $62,000

Variable overhead cost variance = $652,500 - $62,000 = $590,500 U

Therefore, the correct choice is C, which indicates a variable overhead cost variance of $35,000 U.

Elite Brand Company Uses Standard Costs for Their Manufacturing Division