Question

The Maxit 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: $25,700
• Actual machine-hours worked: 3,000 hours
• Variable overhead rate variance: $5,520 U
• Total variable overhead spending variance: $7,700 U

The variable overhead efficiency variance for July is:

Multiple Choice

• $13,220 F

• $13,220 U

• $2,180 U

• $2,180 F

Tharaldson Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.3	ounces	$	2.00	per ounce	$	12.60
Direct labor		0.4	hours	$	11.00	per hour	$	4.40
Variable overhead		0.4	hours	$	6.00	per hour	$	2.40

The company reported the following results concerning this product in June.

Originally budgeted output		3,300	units
Actual output		2,600	units
Raw materials used in production		21,300	ounces
Purchases of raw materials		22,400	ounces
Actual direct labor-hours		470	hours
Actual cost of raw materials purchases	$	42,000
Actual direct labor cost	$	13,300
Actual variable overhead cost	$	3,650

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 labor rate variance for June is:

Garrison 16e Rechecks 2017-10-31

Multiple Choice

• $2,552 U

• $8,130 U

• $8,130 F

• $2,552 F

Answer 1

1. Variable overhead efficiency variance

= VOH spending variance - VOH rate variance

= 7700U - 5520U

= 2180 U

.

2. Labor rate variance = (SR-AR) *AH

= (11-13300/470)*470

= 8130 U