Sholette Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs) at $5.00 per MH. During the month, the actual total variable manufacturing overhead was $22,540 and the actual level of activity for the period was 4,600 MHs. What was the variable overhead rate variance for the month?
A)$92 Favorable
B)$92 Unfavorable
C)$460 Unfavorable
D)$460 Favorable

Question

Quizplus · Accepted Answer

Variable overhead rate variance = (Actual variable overhead rate - Budgeted variable overhead rate) x Actual hours

Budgeted variable overhead rate = $5.00 per MH

Actual variable overhead rate = Actual variable overhead / Actual hours = $22,540 / 4,600 MHs = $4.90 per MH

Variable overhead rate variance = ($4.90 - $5.00) x 4,600 MHs = $460 favorable.

Sholette Manufacturing Corporation Has a Standard Cost System in Which