Kronstedt Corporation has a standard cost system in which it applies manufacturi
ID: 2388921 • Letter: K
Question
Kronstedt Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month:Budget Level of Activity....... 6,100 MHs
Actual Level of Activity....... 6,300 MHs
Cost formula for variable overhead cost.... $6.70 per MH
Budgeted fixed manufacturing overhead cost.... $42,000
Actual Total variable overhead.......... $41,580
Actual total fixed manufacturing overhead.... $45,000
What was the variable overhead rate variance for the month?
A. $710 unfavorable
B. $1,340 unfavorable
C. $630 favorable
D. $3,000 unfavorable
Explanation / Answer
Variable overhead cost absorbed = actual quantity * Budgeted rate =6,300 * $6.70 =$42210 Standard variable overhead cost = Standard output for actual cost * Budgeted rate =$41,580 /6.70 * 6.7 variable overhead rate variance = Variable overhead cost absorbed- Standard variable overhead cost = $630 C. $630 favorable
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