## Standard variable factory overhead rate

For example, your budgeted fixed costs are \$12,000, budgeted variable costs are \$4,000, and the budgeted production is 4,000 units. Your standard fixed factory

Suppose the variable portion of predetermined overhead rate is \$6 and a unit of product takes 3.5 direct labor hours to complete, the standard variable manufacturing overhead cost would be computed as follows: = Direct labor hours per unit × Variable portion of predetermined overhead rate = 3.50 × \$6.00 = \$21.00. Add up total overhead. Add up estimated indirect materials, indirect labor, and all other product costs not included in direct materials and direct labor. This amount includes both fixed and variable overhead. For example, assume that total overhead for Band Book Company is estimated to cost \$100,000. Notice that for the good output produced in January, the actual cost of variable manufacturing overhead was \$90 and the total standard cost of variable manufacturing overhead cost allowed for the good output was \$84. Actual variable manufacturing overhead: \$75,000 Standard variable manufacturing overhead rate: \$12 per hour Actual hours worked during January: 6,000 hours Required: Using above information, compute variable overhead spending variance of SK manufacturing company for the month of January. According to the flexible manufacturing overhead budget, the expected manufacturing overhead cost at the standard volume (20,000 machine-hours) is \$ 100,000, so the standard overhead rate is \$ 5 per machine-hour (\$100,000/20,000 machine-hours). Knowing the separate rates for variable and fixed overhead is useful for decision making.

## Favorable variances result when actual costs are less than standard costs, and The cost behavior for variable factory overhead is not unlike direct material and

### Favorable variances result when actual costs are less than standard costs, and The cost behavior for variable factory overhead is not unlike direct material and

Notice that for the good output produced in January, the actual cost of variable manufacturing overhead was \$90 and the total standard cost of variable manufacturing overhead cost allowed for the good output was \$84. Actual variable manufacturing overhead: \$75,000 Standard variable manufacturing overhead rate: \$12 per hour Actual hours worked during January: 6,000 hours Required: Using above information, compute variable overhead spending variance of SK manufacturing company for the month of January. According to the flexible manufacturing overhead budget, the expected manufacturing overhead cost at the standard volume (20,000 machine-hours) is \$ 100,000, so the standard overhead rate is \$ 5 per machine-hour (\$100,000/20,000 machine-hours). Knowing the separate rates for variable and fixed overhead is useful for decision making. As a result, the variable cost per unit would be \$2.0 (\$20,000 / 10,000 units). Let's say the company increases its sales of phones, and in the following month, the company must produce 15,000 phones. At \$2 per unit, the total variable overhead costs increased to \$30,000 for the month.

### Variable Overhead spending variance (also called variable overhead rate variance) is the product of actual units of the allocation base of variable overhead and the difference between standard variable overhead rate and actual variable overhead rate. The formula to calculate the variable overhead spending variance is:

the standard variable overhead rate exceeded the actual rate. Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be: favorable. Overhead Rate: In managerial accounting , a cost added on to the direct costs of production in order to more accurately assess the profitability of each product. Overhead costs are all costs that

## Variable overhead efficiency variance is the product of standard variable overhead rate and the difference between the standard units allowed of the variable overhead application base and actual units used of the variable overhead application base. Assuming that variable overhead application base is direct labor hours, the formula to calculate

Favorable variances result when actual costs are less than standard costs, and The cost behavior for variable factory overhead is not unlike direct material and  Standard fixed overhead rate per machine hour: Budgeted fixed overhead \$20,000 Denominator volume (MH) 10,000 \$2.00 \$18,000 Factory overhead  Variable factory overhead rate per DLH \$6.00. Standard DLH allowed 49,500. Actual DLH 48,000. The budget (controllable) variance for June, assuming that  16 Dec 2019 Standard Costs and Variance Analysis. B. Has an effect on the variable factory overhead rate for applying costs to production C. Has no effect  23 Apr 2014 Standard Hours x Standard Rate / hour Standard Hours ( Favorable variable overhead efficiency variance indicates that fewer manufacturing  Variable. Factory. Overhead. Standard Variable Overhead Allocation Rate (SR). X. Standard Quantity of Allocation Base per Unit of Output. Fixed. Factory. Variable factory overhead for August consisted primarily of indirect materials ( welding rods, grinding Standard variable overhead rate per hour of direct labor .

Actual variable overhead cost was equal to standard variable overhead cost. At the end of the year, actual manufacturing overhead costs were \$110,000 and  Favorable variances result when actual costs are less than standard costs, and The cost behavior for variable factory overhead is not unlike direct material and  Standard fixed overhead rate per machine hour: Budgeted fixed overhead \$20,000 Denominator volume (MH) 10,000 \$2.00 \$18,000 Factory overhead  Variable factory overhead rate per DLH \$6.00. Standard DLH allowed 49,500. Actual DLH 48,000. The budget (controllable) variance for June, assuming that  16 Dec 2019 Standard Costs and Variance Analysis. B. Has an effect on the variable factory overhead rate for applying costs to production C. Has no effect  23 Apr 2014 Standard Hours x Standard Rate / hour Standard Hours ( Favorable variable overhead efficiency variance indicates that fewer manufacturing  Variable. Factory. Overhead. Standard Variable Overhead Allocation Rate (SR). X. Standard Quantity of Allocation Base per Unit of Output. Fixed. Factory.