Gilder Corporation makes a product with the following standard costs: Standard Q
ID: 2491745 • Letter: G
Question
Gilder Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 3.5 grams $7.00 per gram $24.50 Direct labor 0.7 hours $10.00 per hour $7.00 Variable overhead 0.7 hours $7.00 per hour $4.90 The company reported the following results concerning this product in June. Originally budgeted output 8,400 units Actual output 8,300 units Raw materials used in production 28,290 grams Purchases of raw materials 30,900 grams Actual direct labor-hours 5,500 hours Actual cost of raw materials purchases $219,390 Actual direct labor cost $59,950 Actual variable overhead cost $36,850 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: $1,743 U $1,743 F $1,650 F $1,650 U
Explanation / Answer
Answer
Variable overhead rate variance = (Actual hour * Variable overhead absorption rate) – Actual Variable overhead
= (5,500 hours * $7.00) - $36,850
= $ 38500 - $36,850
= $ 1650 (Favourable)
Answer : The variable overhead rate variance for June is: $1,650 F
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