Asked by Ahmed Dabour on Jun 13, 2024
Verified
Vermeillen Corporation uses a standard costing system in which variable manufacturing overhead is assigned to production on the basis of the number of machine setups. The following data pertain to one month's operations:Variable manufacturing overhead cost incurred: $70,000Total variable manufacturing overhead variance: $4,550 FavorableStandard machine setups allowed for actual production: 3,550Actual machine setups incurred: 3,500 The variable overhead rate variance is:
A) $1,000 Favorable
B) $1,000 Unfavorable
C) $3,500 Unfavorable
D) $3,500 Favorable
Standard Costing System
is an accounting method used to estimate the cost of production, based on standard costs for materials, labor, and overhead, for the purpose of budgeting and cost control.
Standard Machine Setups
Predetermined procedures and settings used to configure machinery for production runs, aimed at optimizing efficiency and quality.
Variable Manufacturing Overhead
Variable manufacturing overhead consists of production costs that fluctuate with the level of output, such as utilities and materials used in the production process.
- Master the techniques for assessing variable overhead rate differences.
Verified Answer
Actual Variable Overhead - (Standard Variable Overhead Rate x Actual Machine Setups)
Using the given information:
Actual Variable Overhead = $70,000
Standard Variable Overhead Rate = Total Variable Overhead Variance / Standard Machine Setups allowed for actual production = $4,550 / 3,550 = $1.28
Actual Machine Setups = 3,500
Therefore, the variable overhead rate variance = $70,000 - ($1.28 x 3,500) = $3,500 favorable.
Learning Objectives
- Master the techniques for assessing variable overhead rate differences.
Related questions
Vermeillen Corporation Uses a Standard Costing System in Which Variable ...
Brummer Corporation Makes a Product Whose Variable Overhead Standards Are ...
The Variable Overhead Efficiency Variance for June Is ...
The Variable Overhead Efficiency Variance for October Is ...
The Variable Overhead Rate Variance for the Month Is Closest ...