According to ABC Company\'s standards for variable overhead, each unit produced

Question

 According to ABC Company's standards for variable overhead, each unit produced should require 5 direct labor hours to make.  The following information is available for June:  1.  actual variable manufacturing overhead cost incurred during June     totaled $39,000 2.  actual direct labor hours worked during June totaled 4,800 3.  the variable overhead spending variance for June was 4,200 favorable 4.  the total variable overhead variance for June was 10,200 unfavorable  Calculate the number of units produced during June. Enter your answer as a number (i.e., 1,000). Do not use the $, decimals, or type the word units after your answer. 

Explanation / Answer

Total Variable overhead variance   10,200 unfav Variable spending variance                4,200 fav Variable efficiency variance               14,400 unfav (as totla vatiance= Spending+Efficiency) Actual variable overheads   $ 39,000 Actual hours used   4,800 hours Actual overhead rate per hour (39,000/4,800 ) = $ 8.125 per hour Variable spending variance = Actual labour hours (Std variable overhead rate - Actual overhead rate per hr)                     4,200 = 4,800 ( Std rate per hour - 8.125) Therefore, Std variable overhead rate per hour = $ 9 per hour Variable Efficiency variance = Std rate per hour (Std hours for actual output- Actual labour hours)       - 14,400   = 9 ( Std hours for actual output - 4800 ) Therefore, Std hours allowed for actual ouput = 3200 hours Total Std hours allowed for actual ouput   = 3200 hours Std hour allowed per unit of output             = 5 hour' Therefore actual ouput (3200 /5 ) = 640 units

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