Gilder Corporation makes a product with the following standard costs: Standard Q

Question

Gilder Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 3.9 grams $9.00 per gram $35.10 Direct labor 0.7 hours $11.00 per hour $7.70 Variable overhead 0.7 hours $9.00 per hour $6.30 The company reported the following results concerning this product in June. Originally budgeted output 7,400 units Actual output 7,300 units Raw materials used in production 28,330 grams Purchases of raw materials 31,300 grams Actual direct labor-hours 5,000 hours Actual cost of raw materials purchases $284,830 Actual direct labor cost $59,500 Actual variable overhead cost $43,500 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 June is: $1,533 U $1,533 F $1,500 F $1,500 U

Explanation / Answer

The variable overhead rate variance for June

= Actual hour worked(Actual rate - standard rate)

i.e Actual variable overhead cost - Standard cost of actual variable overhead

= 43500 - 5000*9.00 = 43500 - 45000 = $1500 Favorable

Answer : $1,500 F

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