E9-11 Calculating Variable Manufacturing Overhead Variances [LO 9-5] Lamp Light

Question

E9-11 Calculating Variable Manufacturing Overhead Variances [LO 9-5] Lamp Light Limited (LLL) manufactures lampshades. It applies variable overhead on the basis of direct labor hours, Information from LLL's standard cost card follows Quantity Rate Unit Cost 0.6 $0.80 $0.48 overhead During August, LLL hed the following actual results Units produced and sold Actual variable overhead Actual direct labor hours 25,300 9,520 16,300 Required Compute LLL's variable overhead rate variance, variable overhead efficiency variance, and over- or underapplied variable overhoad. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for Favorable/Overapplied and "U"for Unfavorable/Underapplied.) Variable Overhead Rate Variance Variable Overhead Efficiency Variance Variable Overhead Spending Variance 20

Explanation / Answer

Variable overhead rate variance ( actual rate - standard rate )* actual hours (9,520           - .80*16,300) 3,520 F Variable overhead Effiency variance (Actual hours - standard hrs allowed)*standard rate (16,300           - 25,300*.6)*.8 896 U Variable overhead spending variance 2624 F

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