Shawl Corporation's variable overhead is applied on the basis of direct labor-hours

Accounting Sep 10, 2020

Shawl Corporation's variable overhead is applied on the basis of direct labor-hours. The standard cost card for product F02E specifies 5.5 direct labor-hours per unit of F02E. The standard variable overhead rate is $6.80 per direct labor-hour. During the most recent month, 1,560 units of product F02E were made, and 8,700 direct labor-hours were worked. The actual variable overhead incurred was $52,635. Required: A. What was the variable overhead rate variance for the month? B. What was the variable overhead efficiency variance for the month?

Expert Solution

Variable overhead rate variance= Actual variable overhead incurred- Standard variable overhead cost

= 52635- (8700* 6.80)

= 6525 Favorable

Variable overhead efficiency variance= (Actual hour- Standard hour)* Standard rate

= (8700 - 5.5*1560)*6.8

= 816 Unfavorable

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