Question
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$884 U $884 F $940 U $940 F Landram Corporation makes a product with the following standard costs: In March the company produced 4,700 units using 10,230 kilos of the direct material and 2,210 direct labor-hours. During the month, the company purchased 10,800 kilos of the direct material at a cost of $76,680. The actual direct labor cost was $38,233 and the actual variable overhead cost was $11,934. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for March is:
Explanation / Answer
Actual variable overhead cost = $11,934
Actual labor hours = 2,210 hours
Actual variable overhead rate = $11,934/2,210 = $5.40
Variable overhead rate variance = (Standard variable overhead rate - Actual variable overhead rate )* Actual labor hours worked
=($5.00 - $5.40)*2,210
=$884 unfavorable