Question

Rooney Company established a predetermined variable overhead cost rate at $9.40 per direct labor hour. The actual variable overhead cost rate was $8.40 per hour. The planned level of labor activity was 74,900 hours of labor. The company actually used 79,900 hours of labor. Required Determine the total flexible budget variable overhead cost variance and indicate the effect of the variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Answer 1

$32,900 favorable

Step-by-step explanation:

The computation of the total flexible budget variable overhead cost variance is shown below:

= Total budgeted overhead cost - actual budgeted overhead cost

where,

Total budgeted overhead cost is

= $9.40 × 74,900 hours

= $704,060

And, the actual budgeted overhead cost is

= $8.40 × 79,900 hours

= $671,160

So, the total flexible budget variable overhead cost variance is

= $704,060 - $671,160

= $32,900 favorable

Since the standard cost is greater than the actual cost so it would have favorable variance