Question

Amirault Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs) at $4.00 per MH. During the month, the actual total variable manufacturing overhead was $18,040 and the actual level of activity for the period was 4,100 MHs. What was the variable overhead rate variance for the month?

Answer 1

Answer:

$1,640 Adverse

Explanation:

The variable overhead rate variance is the difference between the actual variable overhead cost and  the actual hours multiplied by the standard variable overhead rate.

So we can calculate variable overhead for Amirault Manufacturing as follows:

                                                                                                         $

4,100 hours should have cost (4100× $4.00)    =                    16,400

but did cost ( actual cost                                                         18,040

Variable overhead rate variance                                             1,640 Adverse

Variable overhead rate variance=$1,640 Adverse