The Maxwell Corporation has a standard costing system in which variable manufacturing overhead is assigned to production on the basis of standard machine-hours. The following data are available for July:

• Actual variable manufacturing overhead cost incurred: $22,620
• Actual machine-hours worked: 1,600 hours
• Variable overhead rate variance: $3,420 Unfavorable
• Total variable overhead spending variance: $4,620 Unfavorable

-The standard number of machine-hours allowed for July production is:
A)1,500 hours
B)1,600 hours
C)1,700 hours
D)2,270 hours

Question

The Maxwell Corporation has a standard costing system in which variable manufacturing overhead is assigned to production on the basis of standard machine-hours. The following data are available for July:

• Actual variable manufacturing overhead cost incurred: $22,620
• Actual machine-hours worked: 1,600 hours
• Variable overhead rate variance: $3,420 Unfavorable
• Total variable overhead spending variance: $4,620 Unfavorable

-The standard number of machine-hours allowed for July production is:
A)1,500 hours
B)1,600 hours
C)1,700 hours
D)2,270 hours

Quizplus · Accepted Answer

The variable overhead rate variance is calculated as (Actual hours x Actual rate) - (Actual hours x Standard rate). Given the unfavorable rate variance of $3,420, we can determine the standard rate. The spending variance is calculated as (Actual hours x Actual rate) - (Standard hours x Standard rate). Given the total unfavorable spending variance of $4,620, we can solve for the standard hours, which is 1,500 hours.

The Maxwell Corporation Has a Standard Costing System in Which