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

Question

Doogan Corporation makes a product with the following standard costs: Standard Quantity or Standard Price or Hours 8.7 grams 0.5 hours 0.5 hours Rate Direct materials Direct labor Variable overhead $ 3.30 per gram $33.00 per hour $8.30 per hour The company produced 6,500 units in January using 40,610 grams of direct material and 2,510 direct labor-hours. During the month, the company purchased 45,700 grams of the direct material at $3.00 per gram. The actual direct labor rate was $32.30 per hour and the actual variable overhead rate was $8.10 per hour. 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 January is:

Explanation / Answer

Variable overhead rate variance = (Standard rate-actual rate)actual hours

= (8.30-8.10)*2510

Variable overhead rate variance = 502 Favorable

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