Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company

Question

Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:

Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40

The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:

• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds


The total variance (both rate and efficiency) for variable overhead for January is

A. $85 F
B. $40 F
C. $100 U
D. $125 F

Explanation / Answer

The total Variance analysis for Variable Overhead is given by : Actual Overhead - Overhead Aplied 1475 - (4,000 *0.1 *0.4) = -125 Hence, The variance is 125(F)

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