Elite Brand Company uses standard costs for its 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: At the end of the year,actual data were as follows:
What is the variable overhead cost variance?

Question

Elite Brand Company uses standard costs for its 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:  At the end of the year,actual data were as follows:
 What is the variable overhead cost variance?

Quizplus · Accepted Answer

First, we need to calculate the standard variable overhead cost per unit:

$10,000 / 25,000 = $0.40 per unit

Then, we can calculate the total standard variable overhead cost based on the actual number of units produced:

0.1 DLH x 30,000 units = 3,000 DLH 
3,000 DLH x $4.00 per DLH = $12,000 standard variable overhead cost

Finally, we can calculate the variable overhead cost variance:

Actual variable overhead cost - Standard variable overhead cost

= $13,000 - $48,000

= $35,000 U

Therefore, the best choice is C.

Elite Brand Company Uses Standard Costs for Its Manufacturing Division