Doogan Corporation makes a product with the following standard costs: Standard Q

Question

Doogan Corporation makes a product with the following standard costs: Standard Quantity or Standard Price or Hours Rate Direct materials Direct labor Variable overhead 2.00 per gram 0.5 hours 20.00 per hour 7.00 per hour 7.4 grams 0.5 hours The company produced 5,.200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 per hour. 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 January is

Explanation / Answer

Variable overhead rate variance = (Standard rate-actual rate)Actual hours

= (7-6.80)*2380

Variable overhead rate variance = 476 Favorable

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