Judd Company uses standard costs for its manufacturing division. Standards specify 0.2 direct labor hours per unit of product. The allocation base for variable overhead costs is direct labor hours. At the beginning of the year, the static budget for variable overhead costs included the following dа ta: Production volume 6 comma 200 units Budgeted variable overhead costs $ 13 comma 500 Budgeted direct labor hours 640 hours At the end of the year, actual data were as follows: Production volume 4 comma 200 units Actual variable overhead costs $ 15 comma 200 Actual direct labor hours 495 hours What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

Question

Business

Harley Gill

1 February, 11:57

Judd Company uses standard costs for its manufacturing division. Standards specify 0.2 direct labor hours per unit of product. The allocation base for variable overhead costs is direct labor hours. At the beginning of the year, the static budget for variable overhead costs included the following dа ta: Production volume 6 comma 200 units Budgeted variable overhead costs $ 13 comma 500 Budgeted direct labor hours 640 hours At the end of the year, actual data were as follows: Production volume 4 comma 200 units Actual variable overhead costs $ 15 comma 200 Actual direct labor hours 495 hours What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

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Cullen Pittman · Answer 1

Variable manufacturing overhead rate (cost) variance = $4,756.95 unfavorable

Explanation:

Giving the following information:

Budgeted variable overhead costs $13,500

Budgeted direct labor hours 640 hours

Actual:

Actual variable overhead costs $15,200

Actual direct labor hours 495 hours

To calculate the variable overhead rate (cost) variance, we need to use the following formula:

Variable manufacturing overhead rate variance = (standard rate - actual rate) * actual quantity

Standard rate = 13,500/640 = $21.1

Actual rate = 15,200/495 = $30.71

Variable manufacturing overhead rate variance = (21.1 - 30.71) * 495

Variable manufacturing overhead rate variance = $4,756.95 unfavorable