Miguez Corporation makes a product with the following standard costs: The compan

Question

Miguez Corporation makes a product with the following standard costs:

The company budgeted for production of 4,300 units in September, but actual production was 4,200 units. The company used 7,140 liters of direct material and 1,850 direct labor-hours to produce this output. The company purchased 7,500 liters of the direct material at $8.90 per liter. The actual direct labor rate was $41.10 per hour and the actual variable overhead rate was $3.60 per hour.

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 September is:

Multiple Choice

$294 F

$185 U

$185 F

$294 U

Standard Quantity or
Hours Standard Price or
Rate Standard Cost Per Unit Direct materials 4.0 liters $ 8.70 per liter $ 34.80 Direct labor 0.7 hours $ 39.00 per hour $ 27.30 Variable overhead 0.7 hours $ 3.70 per hour $ 2.59

Explanation / Answer

SOLUTION

The variable overhead rate variance for September is: $185 F

Variable overhead variance = Actual hours * (Actual rate - Standard rate)

= 1,850 * ($3.60 - $3.70)

= 1,850 * $0.10

= $185 (F)

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