6) Irving Corporation makes a product with the following standards for direct la

Question

6) Irving Corporation makes a product with the following standards for direct labor and variable overhead: Standard Cost Per Unit Standard Quantity or Standard Price or Rate Direct labor Variable overhead Hours 0.3 hours 14.00per hour 4.20 .3 hours 5.00 per hour 1.50 In November the company's budgeted production was 5,300 units, but the actual production was 5,100 units. The company used 1,650 di to produce this output. The actual variable overhead cost was $7,590. The company applies variable overhead on the basis of direct labor- The variable overhead rate variance for November is: A) S612 F B) S660 U C) $660 F D) S612 U

Explanation / Answer

Variable overhead rate variance = (Standard rate - Actual rate)*Actual direct labor hours

Actual rate = Actual variable overhead cost/Actual labor hours = $7,590/1,650 = $4.6 per hour

Variable overhead rate variance = ($5 per hour - $4.6 per hour)*1,650 hours = $660 Favourable

Therefore the correct option is C) $660 F

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