Question

the following data for november have been provided by hunn corporation, a producer of precision drills for oil exploration:
budgeted production 5,200 drills
standard machine - hours per drill 10.5 machine - hours
standard indirect labor $ 10.30 per machine - hour
standard power $ 3.90 per machine - hour
actual production 5,400 drills
actual machine - hours 36,850 machine - hours
actual indirect labor $ 384,123
actual power $ 140,450
required:
compute the variable overhead rate variances for indirect labor and for power for november. indicate whether each of the variances is favorable (f) or unfavorable (u).
note: indicate the effect of each variance by selecting \f\ for favorable, \u\ for unfavorable, and
one\ for no effect (i.e., zero variance). input all amounts as positive values.

Explanation:

Step1: Calculate actual rate for indirect labor

Actual rate for indirect labor = $\frac{\text{Actual indirect labor cost}}{\text{Actual machine - hours}}$
$=\frac{384123}{36850}=\$10.42$ per machine - hour

Step2: Calculate variable overhead rate variance for indirect labor

Variable overhead rate variance = $(\text{Actual rate}-\text{Standard rate})\times\text{Actual machine - hours}$
$=(10.42 - 10.30)\times36850$
$=0.12\times36850=\$4422$ (Unfavorable, since actual rate > standard rate)

Step3: Calculate actual rate for power

Actual rate for power = $\frac{\text{Actual power cost}}{\text{Actual machine - hours}}$
$=\frac{140450}{36850}=\$3.81$ per machine - hour

Step4: Calculate variable overhead rate variance for power

Variable overhead rate variance = $(\text{Actual rate}-\text{Standard rate})\times\text{Actual machine - hours}$
$=(3.81 - 3.90)\times36850$
$=- 0.09\times36850=\$3316.5$ (Favorable, since actual rate < standard rate)

Answer:

Indirect labor: $4422$ (U)
Power: $3316.5$ (F)