Venus company applies overhead based on direct labor hours. the variable overhead standard is 10 hours at $3.50 per hour. during october, venus company spent $157,600 for variable overhead. 47,440 labor hours were used to produce 4,800 units. what is the variable overhead rate variance?

In order to compute the variable overhead rate variance, you need to compare the actual overhead paid and the budgeted overhead. In this problem, the actual variable overhead paid is $157,600 and to get the budgeted variable overhead, you need to multiply the standard rate with the actual labor hours worked (47,440 labor hours x $3.50) giving you the result of $166,040. Comparing the actual variable overhead and the budgeted variable overhead, you can see that there will be $8,440 favorable variance. This would clearly result to an favorable variance because the company have actually paid lesser than the budgeted variable overhead.

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