Asked by Michael Petropulos on Jul 12, 2024
Verified
The standard variable overhead rate per direct labour hour is:
A) $6.91.
B) $7.00.
C) $7.12.
D) $6.95.
Standard Variable Overhead Rate
The predetermined rate at which variable overhead costs are expected to be incurred relative to a certain measure of activity, such as labor hours.
Direct Labour Hours
Direct Labour Hours represent the amount of time spent by workers directly involved in manufacturing a product or providing a service.
Variable Overhead
Indirect operating costs that change in proportion to the level of production or business activity.
- Gain an understanding of how manufacturing overhead is integral to standard costing, with a focus on its variable and fixed aspects.
- Ascertain the approach for applying overhead expenses by employing standard costing systems.
Verified Answer
DM
Desiree' MonroeJul 16, 2024
Final Answer :
B
Explanation :
The formula for calculating the standard variable overhead rate per direct labour hour is:
Standard variable overhead rate per direct labour hour = Total standard variable overhead cost / Total standard direct labour hours
Since the only given information is the standard hours allowed for actual production, we need to calculate the total standard variable overhead cost.
Total variable overhead variance = Actual variable overhead - (Standard variable overhead rate x Actual direct labour hours)
$300 F = $48,700 - (Standard variable overhead rate x 6,840)
Solving for Standard variable overhead rate:
Standard variable overhead rate = ($48,700 - $300 F) / 6,840 = $7.00 per direct labour hour
Therefore, the best choice is B) $7.00.
Standard variable overhead rate per direct labour hour = Total standard variable overhead cost / Total standard direct labour hours
Since the only given information is the standard hours allowed for actual production, we need to calculate the total standard variable overhead cost.
Total variable overhead variance = Actual variable overhead - (Standard variable overhead rate x Actual direct labour hours)
$300 F = $48,700 - (Standard variable overhead rate x 6,840)
Solving for Standard variable overhead rate:
Standard variable overhead rate = ($48,700 - $300 F) / 6,840 = $7.00 per direct labour hour
Therefore, the best choice is B) $7.00.
Learning Objectives
- Gain an understanding of how manufacturing overhead is integral to standard costing, with a focus on its variable and fixed aspects.
- Ascertain the approach for applying overhead expenses by employing standard costing systems.