The LAH Company Produces Product BG,which Includes Variable Overhead Standard $$\begin{array} { l r } \text { Production } & 3,100 \\\text { Hours incurred } & 16,000 \\\text { Variable overhead } & £ 235,00\end{array}$$

question 9

Multiple Choice

The LAH company produces product BG,which includes variable overhead standard cost of 5 hours at £15 per hour,based on a budget production of 3,000 units.The actual results for the last period were as follows:
$$\begin{array} { l r } \text { Production } & 3,100 \\\text { Hours incurred } & 16,000 \\\text { Variable overhead } & £ 235,00\end{array}$$
Calculate the variable overhead cost variance.

• A) £5,000 favorable
• B) £5,000 adverse
• C) £7,500 favorable
• D) £7,500 adverse

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Definitions:

Estimated Labor-Hours

A projection of the total hours of work required to complete a task or project.

Variable Manufacturing Overhead

The indirect, variable costs associated with manufacturing a product, which change in proportion to production volume.

Fixed Manufacturing Overhead

Refers to the regular, consistent expenses incurred in the operation of a manufacturing facility that do not vary with production volume, including salaries of permanent staff, rent, and insurance.

Predetermined Overhead Rate

A predetermined rate for assigning manufacturing overhead to products, calculated at the start of the period using estimated expenses and levels of activity.