There may be standards for variable overhead, as well as for direct materials and direct labor. The standards are typically expressed in terms of a “rate” and “hours,” much like direct labor.
The “rate” is the variable portion of the predetermined overhead rate.
The “hours” represent whatever base is used to apply overhead cost to products. Ordinarily, this would be direct labor hours or machine hours.
Speeds, Inc. applies overhead cost to products on the basis of direct labor hours. The variable portion of the predetermined overhead rate is $4 per direct labor hour. Using this rate, the standard cost of variable overhead for one unit of product is:
2.0 hrs. per jogging suit ´ $4 per hr. = $8 per jogging suit.