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

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 tollows: Standard Standard Standard Quantity Rate Unit Cost $0.80 $0.48 overheacd During August, LLL had the following actual results: Units produced and sold Actual variable overhead Actual direct labor hours 24,700 $ 9,460 15,700 Required: Compute LLL's varlab the effect of each variance by selecting "P for Favorable/Overapplied and "U" for underapplied vanable overhead. (Do not round intermediate calculations. Indicat ble overhead rate variance, variable overhoad efficiency variance, and over- or Variable Overhead Rate Variance Variable Overhead Efficiency Variance Variable Overhead Variance

Explanation / Answer

Variable Overhead Rate Variance = AH *(SR – AR Variable Overhead Rate Variance = 15700 * (0.80 - 0.60 Variable Overhead Rate Variance = 3140 F Variable Overhead Efficiency Variance = SR * (SH – AH Variable Overhead Efficiency Variance = 0.8 *(14820 -15700 ) Variable Overhead Efficiency Variance = 0.8 *(14820 -15700 ) Variable Overhead Efficiency Variance = 704 U Variable overhead spending variance = variable overhead rate variance + efficiency variance variable overhead spending variance = 3140 F + 704 U = 2436 F *Actual rate = 9460/15700 = 0.60 *Standard hours = 24700 *0.6 = 14820

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