Question

Kartman Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		7.3	pounds	$	7.80	per pound	$	56.94
Direct labor		0.4	hours	$	32.00	per hour	$	12.80
Variable overhead		0.4	hours	$	4.80	per hour	$	1.92

In June the company's budgeted production was 4,200 units but the actual production was 4,300 units. The company used 22,950 pounds of the direct material and 2,370 direct labor-hours to produce this output. During the month, the company purchased 26,200 pounds of the direct material at a cost of $178,180. The actual direct labor cost was $57,821 and the actual variable overhead cost was $11,031.

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 June is:

Answer 1

Variable overhead rate variance = (Standard rate-actual rate)actual hours

= (4.8*2370-11031)

variable overhead rate variance = 345 F