Question

Judd Company uses standard costs for its manufacturing division. Standards specify 0.1 direct labor hours per unit of product. The allocation base for variable overhead costs is direct labor hours. At the beginning of the year, the static budget for variable overhead costs included the following data:
Production volume 6,300 units
Budgeted variable overhead costs $ 16,000
Budgeted direct labor hours 650 hours
At the end of the year, actual data were as follows:
Production volume 4 ,100 units
Actual variable overhead costs $ 15,300
Actual direct labor hours 485 hours
What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
A. $15,000 U
B. $5,161 F
C. $3,891 U
D. $15,200 F

Answer 1

Answer:

Variable overhead cost variance is 3,361.725 U

Explanation::

Budgeted variable overhead costs = $16,000

Budgeted direct labor hours = 650 hours

Budgeted variable overhead per labor hour = 16000 / 650 = 24.615

Budgeted variable overhead costs to be incurred for actual labor hours =

Actual direct labor hours x Budgeted variable overhead per labor hour

= 485* 24.615

= 11,938.275

Actual variable costs actually incurred = 15,300

Variable overhead cost variance = Actual variable costs actually incurred - Actual direct labor hours x Budgeted variable overhead per labor hour

=15,300 - 11,938.275

=3,361.725

=3,361.725 U