Beverly Company has determined a standard variable overhead rate of $1.75 per di
ID: 2463351 • Letter: B
Question
Beverly Company has determined a standard variable overhead rate of $1.75 per direct labor hour and expects to incur 1.0 labor hour per unit produced. Last month, Beverly incurred 1,020 actual direct labor hours in the production of 1,120 units. The company has also determined that its actual variable overhead rate is $1.70 per direct labor hour.
Calculate the variable overhead rate and efficiency variances also indicate if the variable are favorable or unfavorable the total amount of over- or underapplied variable overhead. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)
Explanation / Answer
Answer: Variable overhead rate variance=(SR-AR)*AH
=($1.75-$1.70)*1020
=$51 F
Variable overhead efficiency variance=(SH-AH)*SR
=(1120-1020)*1.75
=175 F
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