Judd Company uses standard costs for its manufacturing divis

Judd Company uses standard costs for its manufacturing division. Standards specify 0.1 direct labor hours per unit of product. The allocation base for variable overhead costs is direct labor hours. At the beginning of the year, the static budget for variable overhead costs included the following data: Production volume Budgeted variable overhead costs Budgeted direct labor hours 6,100 units S15,000 650 hours At the end of the year, actual data were as follows: Production volume Actual variable overhead costs Actual direct labor hours 4,000 units $15,200 490 hours What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) OA. $15,000 U O B. $5,161 O C. $3,891 U O D. $15,200 F

Solution

Calculation of Budgeted cost for actual labor hours:

Budgeted varibale overhead costs = $15000

Budgeted direct labor hours = 650 hours

Budgeted variable overhead per labor hour = 15000/650 = 23.077

Budgeted variable overhead costs to be incurred for actual labor hours =

Actual direct labor hours*Budgeted variable overhead per labor hour = 490* 23.077 = 11307.73

Actual variable costs actually incurred = 15200

Variable overhead cost variance = Actual variable costs actually incurred - Actual direct labor hours*Budgeted variable overhead per labor hour

= 15200 - 11307.73 = 3892.27 U

Answer is C. $3891 U

Difference is there due to rounding off error.