Question

Calculating the Total Overhead Variance

Standish Company manufactures consumer products and provided the following information for the month of February:

Units produced	131,000
Standard direct labor hours per unit	0.20
Standard variable overhead rate (per direct labor hour)	$3.40
Actual variable overhead costs	$88,670
Actual hours worked	26,350

Required:

1. Calculate the total variable overhead variance.
$  Favorable

2. What if actual production had been 129,600 units? How would that affect the total variable overhead variance? Indicate what the new variance would be below.
$  Unfavorable

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Answer 1

Answers

• Requirement 1

Total Variable Overhead variance = $ 410 Favourable

Total Variable Overhead Variance
(	Standard Cost = 131000 units x 0.2 hrs x $ 3.40	-	Actual Cost	)
(	$                      89,080.00	-	$            88,670.00	)
	410
	Variance		$                  410.00			Favourable-F

• Requirement 2

Total variable Overhead Variance = $ 542 Unfavourable

Total Variable Overhead Variance
(	Standard Cost = 129600 x 0.2 hrs x $ 3.40	-	Actual Cost	)
(	$                      88,128.00	-	$            88,670.00	)
	-542
	Variance		$                  542.00			Unfavourable-U