Question

Majer Corporation makes a product with the following standard costs:Standard Quantity or Hours Standard Price or Rate Standard Cost Per UnitDirect materials 6.3 ounces $ 2.00 per ounce $ 12.60Direct labor 0.5 hours $ 10.00 per hour $ 5.00Variable overhead 0.5 hours $ 4.00 per hour $ 2.00The company reported the following results concerning this product in February.Originally budgeted output 4,900 unitsActual output 5,000 unitsRaw materials used in production 30,000 ouncesActual direct labor-hours 1,900 hoursPurchases of raw materials 32,400 ouncesActual price of raw materials $ 12.90 per ounceActual direct labor rate $ 22.40 per hourActual variable overhead rate $ 4.00 per hourThe company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.Required:1. The variable overhead efficiency variance for February is __________.

Answer 1

Answer:

variable overhead efficiency variance= $2,400 favorable

Explanation:

Giving the following information:

Standard:

Variable overhead = $4.00 per hour

Actual output of 5,000 units

Actual direct labor-hours 1,900 hours

To calculate the variable overhead efficiency variance, we need to use the following formula:

variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate

Standard quantity= 5,000 units* 0.5 hours= 2,500 hours

Actual quantity= 1,900 hours

variable overhead efficiency variance= (2,500 - 1,900)*4= $2,400 favorable