Majer Corporation makes a product with the following standard costs: The company

Question

Majer Corporation makes a product with the following standard costs:

The company reported the following results concerning this product in February.

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 February is:

Multiple Choice

$1,827 F

$1,832 F

$1,827 U

$1,832 F

Standard Quantity
or Hours Standard Price or
Rate Standard Cost Per Unit Direct materials 6.1 ounces $ 2.00 per ounce $ 12.20 Direct labor 0.7 hours $ 12.00 per hour $ 8.40 Variable overhead 0.7 hours $ 2.00 per hour $ 1.40

Explanation / Answer

Variable overhead rate variance=Actual labor hours*(Standard variable overhead rate per hour-Actual variable overhead rate per hour) Variable overhead rate variance=2030*(2-1.10)=1827 F Variance is favorable since actual variable overhead rate is less than standard variable overhead rate. Answer is $1827 F.

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