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24 June, 10:54

The following data have been provided by Lopus Corporation: Budgeted production 2,700 units Standard machine-hours per unit 2.8 machine-hours Standard lubricants $ 4.30 per machine-hour Standard supplies $ 3.00 per machine-hour Actual production 3,000 units Actual machine-hours 8,180 machine-hours Actual lubricants (total) $ 36,722 Actual supplies (total) $ 24,112 Required: Compute the variable overhead rate variances for lubricants and for supplies.

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  1. 24 June, 12:00
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    Answer and Explanation:

    The computation of the variable overhead rate variances is shown below:

    As we know that

    Variable overhead rate variance = (standard rate - actual rate) * actual hour

    For Lubricants

    Actual rate = $36,722 : 8,180 machine hours = 4.48924

    Now the variable overhead rate variance is

    = ($4.30 - $4.48924) * 8,180 machine hours

    = $1,548 Unfavorable

    For Supplies

    Actual rate = 24,112 : 8,180 machine hours = $2.9476

    Now the variable overhead rate variance is

    = ($3 - $2.9476) * 8,180 machine hours

    = $429 favorable

    We simply applied the above formula
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