ABC Corporation has a standard costing system in which variable manufacturing ov
ID: 2578514 • Letter: A
Question
ABC 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: $31,230 • Actual machine-hours worked: 1,800 hours • Variable overhead rate variance: $4,230 Unfavorable • Total variable overhead spending variance: $6,240 Unfavorable The standard number of machine-hours allowed for July production is: a) 2,722 hours b) 1,700 hours Incorrect c) 1,666 hours d) 1,500 hours
Explanation / Answer
Variable overhead rate variance = Actual cost-(AH*SR) 4230 = 31230-(1800*SR) 1800 SR = 27000 SR = 15 Variable overhead efficinecy variance = 6240-4230= 2010 unfavorable 2010 = 15*(1800-SH) 134 = 1800-SH SH = 1666 Option C is correct