Based on the following information, calculate the variable overhead rate variance. Actual variable overhead cost $15,500 Actual hours used 4,200 Standard hours allowed 4,000 Standard variable overhead rate $3.75 per hour

Rate variance = $250 favorable

Explanation:

The variable overhead rate variance is the difference between the actual variable cost and the standard variable overhead  cost the actual actual hours used.

We would compare the actual cost to the standard cost of the actual hours used . This is done below as follows:

                                                                                               $

4,200 hours should have cost (4200 × 3.75 )               15,750

but did cost                                                                       15,500

Rate variance                                                                      250  Favorable

Note the actual hours of 4,200 cost $250 less than it should be have cost . Hence the variance is favorable

Rate variance = $250

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