The Haney Corporation has a standard costing system. Variable manufacturing overhead is applied on the basis of direct labor-hours. The following data are available for January: Actual variable manufacturing overhead: $25,500 Actual direct labor-hours worked: 5,800 Variable overhead rate variance: $600 Favorable Variable overhead efficiency variance: $2,475 Unfavorable The standard hours allowed for January production is:

5,250 hours

Explanation:

Given the above information, we will get the standard hours allowed for January production through the computation of variable overhead rate variance and variable overhead efficiency variance

Variable overhead rate variance

= (AH × AR) - (AH × SR)

$600 F = $25,500 - (5,800 hours × SR)

-$600 = $25,500 - (5,800 hours × SR)

5,800 hours × SR = $25,500 + $600

5,800 hours × SR = $26,100

SR = $26,100 / 5,800 hours

SR = $4.5 per hour

Also,

Variable overhead efficiency variance

= (AH - SH) × SR

$2,475 U= (5,800 hours - SH) × $4.50 per hour

$2,475 = (5,800 hours - SH) × $4.50 per hour

5,800 hours - SH = $2,475 ÷ $4.50 per hour

5,800 hours - SH = 550 hours

SH = 5,800 hours - 550 hours

SH = 5,250 hours

Therefore, the standard hours allowed for January production is 5,250 hours

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