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Sholette Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs) at $10.00 per MH. During the month, the actual total variable manufacturing overhead was $66,430 and the actual level of activity for the period was 7,300 MHs. What was the variable overhead rate variance for the month

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Answer:

Variable overhead rate variance is $6,570 Favorable.

Explanation:

Variable overhead rate variance = variable overhead expenditure variance + variable overhead efficiency variance.

Note : Only data for calculation of variable overhead expenditure variance is available

Variable overhead expenditure variance =Actual activity at standard rate - Actual overheads

                                                                   = ( 7,300 × $10.00) - $66,430

                                                                   = $6,570 Favorable

Thus,

Variable overhead rate variance is $6,570 Favorable

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