Handerson Corporation makes a product with the following standard costs: The com

Question

Handerson Corporation makes a product with the following standard costs:

The company reported the following results concerning this product in August.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for August is:

$420 F

$760 F

$420 U

$760 U

Standard Quantity or Hours Standard Price or Rate Direct materials 9.5 kilos $ 7.00 per kilo Direct labor 0.5 hours $ 30.00 per hour Variable overhead 0.5 hours $ 7.00 per hour

Explanation / Answer

C. $420 U

Variable overhead rate variance = (AH × AR) - (AH × SR)

= $8,540 - (1,160 hours × $7.00 per hour)

= $8,540 - $8,120

= $420 U

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