Question

Doogan Corporation makes a product with the following standard costs Standard Quantity or Hours 8.5 grams 0.6 hours 0.6 hours Standard Price or Rate Direct materials Direct labor Variable overhead s 3.10 per gram $31.00 per hour s 8.10 per hour The company produced 6,300 units in January using 40,410 grams of direct material and 2,490 direct labor-hours. During the month, the company purchased 45,500 grams of the direct material at $2.80 per gram. The actual direct labor rate was $30.30 per hour and the actual variable overhead rate was $7.90 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 January is:

Answer 1

C. $498 F

Variable overhead rate variance = AH(AR - SR)

= 2,490 hours ($7.90 per hour - $8.10 per hour)

= 2,490 hours (-$0.20 per hour)

= $498 F