The Ferris Company applies manufacturing overhead costs to products on the basis of standard direct labor-hours. The standard cost card shows that 3 direct labor-hours are required per unit of product. For August, the company budgeted to work 90,000 direct labor-hours and to incur the following total manufacturing overhead costs:
Total var mft OH cost $99,000
Total Fixed Mft oh cost $ 118,800
During August, the company completed 28,000 units of product, worked 86,000 direct labor-hours, and incurred the following total manufacturing overhead costs:
Total var mft OH cost $98,900
Total Fixed Mft oh cost $ 115,300
The denominator activity in the predetermined overhead rate is 90,000 direct labor-hours.
For August, the variable overhead rate variance is:
How you get the rate?