Lamp Light Limited (LLL) manufactures lampshades. It applies variable overhead o
ID: 2460876 • Letter: L
Question
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:
Compute LLL’s variable overhead rate variance, variable overhead efficiency variance, and over or underapplied variable overhead. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.)
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Standard Quantity Standard Rate Standard Unit Cost Variable manufacturing overhead 0.6 $0.80 $0.48Explanation / Answer
a) Variable overhead rate variance = Actual hours worked x std rate - Actual variable overhead
Std rate = 0.80
Actual hours = 16200
Actual variable overhead = 9510
= (16200 x 0.80 ) - 9510
= 12960 - 9510,= 3450 F
b) Variable overhead efficiency variance = Std. rate x (Std. time for actual production - actual time worked)
standard hours per unit = 0.6
standard hour for actual production = 25200 x 0.60, = 15120
variable overhed efficiency variance = 0.80 ( 15120 - 16200) = 864 U
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