Speaker City designs and manufactures high-end home theater speakers. Speaker City uses a standard overhead rate of 2.0 hours per unit at a cost of $8.00 per hour. Data for the month of June shows that Speaker City produced 400 units and recorded actual overhead costs of $24,500. What is the total variable overhead variance for the month of June?

Question

Quizplus · Accepted Answer

The total variable overhead variance is calculated as the difference between the actual overhead costs and the standard overhead costs. The standard overhead cost for 400 units is calculated as 400 units * 2.0 hours/unit * $8.00/hour = $6,400. The actual overhead cost is $24,500. Therefore, the variance is $24,500 - $6,400 = $18,100 unfavorable, because the actual costs were higher than the standard costs.

Speaker City Designs and Manufactures High-End Home Theater Speakers