Cheney Company established a predetermined variable overhead cost rate at $21.00

Question

Cheney Company established a predetermined variable overhead cost rate at $21.00 per direct labor hour. The actual variable overhead cost rate was $19.20 per hour. The planned level of labor activity was 76,000 hours of labor. The company actually used 80,000 hours of labor. Required Determine the total flexible budget variable overhead cost variance and indicate the effect of the variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Explanation / Answer

Total flexible budget variable overhead cost variance = Flexible variable overhead-Actual variable overhead

= (80000*21)-(80000*19.20)

Total flexible budget variable overhead cost variance = 144000 Favorable

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