To calculate the variable overhead rate variance, we use the formula:

$\text{Variable Overhead Rate Variance} = (\text{Actual Hours} \times \text{Standard Rate}) - \text{Actual Variable Overhead Cost}$

Given data:

• Standard variable overhead rate: $19.80 per hour
• Actual hours: 2,100 hours
• Actual total variable overhead cost: $40,740

Step 1: Calculate the budgeted overhead cost based on the standard rate

$\text{Budgeted Cost} = \text{Actual Hours} \times \text{Standard Rate}$ $\text{Budgeted Cost} = 2,100 \times 19.80 = 41,580$

Step 2: Calculate the rate variance

$\text{Rate Variance} = \text{Budgeted Cost} - \text{Actual Cost}$ $\text{Rate Variance} = 41,580 - 40,740 = 840$

Step 3: Determine if the variance is favorable or unfavorable

Since the budgeted cost ($41,580) is greater than the actual cost ($40,740), the variance is favorable (F).

Final Answer:

$840 Favorable (F)

Would you like a further breakdown of the steps, or assistance with related calculations?

Here are 5 follow-up questions for expansion:

1. What is the formula for variable overhead efficiency variance, and how does it relate to this problem?
2. How can unfavorable rate variances impact financial planning in manufacturing?
3. What steps can a company take to reduce rate variances in the future?
4. How would this calculation differ if actual hours were not provided directly?
5. Why is it important to separate rate and efficiency variances in overhead analysis?

Tip: Always verify both actual and standard costs for accuracy before variance analysis to avoid errors in interpretation.