Question

Majer Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6.2 ounces $ 4.00 per ounce $ 24.80 Direct labor 0.5 hours $ 17.00 per hour $ 8.50 Variable overhead 0.5 hours $ 4.00 per hour $ 2.00 The company reported the following results concerning this product in February. Originally budgeted output 4,900 units Actual output 5,000 units Raw materials used in production 30,200 ounces Actual direct labor-hours 2,080 hours Purchases of raw materials 32,600 ounces Actual price of raw materials $ 67.10 per ounce Actual direct labor rate $ 57.60 per hour Actual variable overhead rate $ 5.80 per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for February is:

Answer 1

Answer:

Variable overhead efficiency variance $1,680  Favorable

Explanation:

Variable overhead efficiency variance:  Variable overhead efficiency variance aims to determine whether or not their exist savings or extra cost incurred on variable overhead as a result of workers being faster or slower that expected.

Since the variable overhead is charged using labour hours, any amount by which the actual labour hours differ from the standard allowable hours would result in a variance

                                                                                                      Hours

5000 units should have taken (5000×0.5 hours)                    2,500

but did take                                                                                 2,080  

Labour hours variance                                                                 420  favorable

Standard variable overhead rate                                             ×$ 4.00 per hour

Variable overhead efficiency variance                                   $1,680  Favorable