14. What is the variable overhead rate variance for March? (Round the actual ove

Question

14. What is the variable overhead rate variance for March? (Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

14b What is the variable overhead efficiency variance for March? (Do not round intermediate calculations. Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

Required information The Foundational 15 [LO10-1, LO10-2, LO10-3] [The following information applies to the questions displayed below.] Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct materials:6 pounds at $8 per pound Direct labor: 3 hours at $14 per hour Variable overhead: 3 hours at $5 per hour Total standard cost per unit $ 48 42 15 $105 The planning budget for March was based on producing and selling 19,000 units.However, during March the company actually produced and sold 24,000 units and incurred the followingg costs a. Purchased 160,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production b. Direct laborers worked 60,000 hours at a rate of $15 per hour. c. Total variable manufacturing overhead for the month was $336,600

Explanation / Answer

A) Calculation of Variable Overhead rate variance for March

Standard hours = Actual output × Standard time per unit

                      = 24000 units × 3 hours

                      = 72000 hours

Variable Overhead rate per hour = Actual variable Over Head / Standard hours

                     = $336,600 / 72000 hours

                     = 4.675 per hour

B) Veriable Over Head Efficiency Variance =( Standard Hours - Actual Hours) × Standared Rate

Actual Hours = 60000 hours

Standard Hours = 72000 hours

Standard Rate = $5 per hour

OVH Efficiency Variance = (72000 hours- 60000 hours)× $5 per hour

                                         = $60000 F

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