Zacher Corporation makes a product with the following standards for direct labor

Question

Zacher Corporation makes a product with the following standards for direct labor and variable overhead:

                                                Standard quantity or hours                  Standard price or rate           Standard cost per unit

Direct labor                            0.3 hours                                                                $24.00 per hour                     $7.20

Variable overhead                 0.3 hours                                                                $5.00 per hour                       $1.50

In February the company's budgeted production was 6,900 units, but the actual production was 7,000 units. The company used 1,980 direct labor-hours to produce this output. The actual variable overhead cost was $10,296. The company applies variable overhead on the basis of direct labor-hours.

The variable overhead rate variance for February is:

$420 U

$420 F

$396 F

$396 U

$420 U

$420 F

$396 F

$396 U

Explanation / Answer

Answer : Answer 'D' is correct.

Variable Overhead variance = (AH * AR) - (AH*SR)

= 10296-1980*5

= 10296-9900

= 396 ( Unfavorable)

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