Question Details The Waters Company has a standard costing system. Variable manu

Question

Question Details
The Waters Company has a standard costing system. Variable manufacturing overhead is assigned to production on the basis of machine hours.

The following data are available for July:


·Actual variable manufacturing overhead cost incurred: $45,240


·Actual machine hours worked: 3,200


·Variable overhead spending variance: $6,840 unfavorable


·Total variable overhead variance: $9,240 unfavorable


The standard number of machine hours allowed for July production is:
1) 3,200 hours.
2) 3,000 hours.
3) 3,400 hours.
4) 4,540 hours.


show your work please.......

Explanation / Answer

Given : VOH Spending Variance -6840 VOH Cost Variance -9240 VOH Spending Variance is -2400 given by the formula : Actual OH - (Std Rate * Actual M hours) = -6840 45240 - (Std Rate * 3200 ) = -6840 Solving the above equation , we get Standard Rate = $12 /Mhour Now, VOH Cost Variance = VOH spending Variance + VOH Efficience Variance -9240 = -6840 + VOH Efficiency Variance VOH EfficiencyVariance = -9240+6840 VOH EfficiencyVariance = -9240+6840                                      = -2400 VOH Efficiency Variance = (AMH -SMH ) * Standard Rate -2400 = ( 3200 - SLH ) * 12 Solving the equation we get, SMH = 3400

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