Hudson Company\'s variable overhead is applied on the basis of direct labor hour

Question

Hudson Company's variable overhead is applied on the basis of direct labor hours. The standard cost card specifies 3 direct labor hours per unit of its product. The standard variable overhead rate is $5 per direct labor hour. Last quarter, Hudson actually produced 10,000 units of product. The company's accounting records show its variable overhead efficiency variance was $5,000 Unfavorable and variable overhead rate variance was $12,000 Favorable. What was Hudson's actual variable overhead cost last quarter?

Explanation / Answer

Ans. Variable Overhead rate variance = (Actual Hours x Actual variable rate) - (Actual Hours x Standard rate) ($12,000)= (10,000 x 3 x Actual variable rate) - (10,000 x 3 x $5) ($12,000)= (30,000 x Actual variable rate) - $150,000 $138,000= (30,000 x Actual variable rate) Actual variable rate= $138,000/30,000 = $       4.60

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.