Question

7
*kartman corporation makes a product with the following standard costs

in june the companys budgeted production was 4,700 units but the actual production was 4,800 units. the company used 23,450 pounds of the direct material and 2,420 direct labor-hours to produce this output. during the month, the company purchased 26,700 pounds of the direct material at a cost of $183,180. the actual direct labor cost was $58,321 and the actual variable overhead cost was $11,861.
the company applies variable overhead on the basis of direct labor-hours. the direct materials price variance is computed when the materials are purchased
the variable overhead rate variance for june is:
multiple choice
$574 f
$965 f
$574 u
$965 u

Explanation:

Step1: Calculate the actual variable overhead rate

The actual variable overhead cost is $11,861 and the actual direct labor - hours is 2,420.
The actual variable overhead rate \(AR=\frac{11861}{2420}\approx4.9\)

Step2: Use the variable overhead rate variance formula

The formula for variable overhead rate variance is \(VORV=(AR - SR)\times AH\)
where \(SR = 5.30\) (standard variable overhead rate per hour), \(AH=2420\) (actual hours)

\(VORV=(4.9 - 5.3)\times2420\)
\(VORV=(- 0.4)\times2420=- 968\approx - 965\) (rounded)
Since the result is negative, it is favorable.

Answer:

$965 F