Question

Porter Company uses standard costs for its manufacturing division. Standards specify 0.1 direct labor hours per unit of product. The allocation base for variable overhead costs is direct labor hours. At the beginning of the​ year, the static budget for variable overhead costs included the following​ data: Production volume 6 comma 400 units Budgeted variable overhead costs $ 13 comma 500 Budgeted direct labor hours​ (DLHr) 640 hours At the end of the​ year, actual data were as​ follows: Production volume 4 comma 200 units Actual variable overhead costs $ 15 comma 300 Actual direct labor hours​ (DLHr) 485 hours What is the variable overhead efficiency​ variance? (Round any intermediate calculations to the nearest​ cent, and your final answer to the nearest​ dollar.)

Answer 1

Answer:

1,370.85 Unfavorable

Explanation:

Standard rate :

= Budgeted variable overhead costs ÷ Budgeted direct labor hours

= $13500 ÷ 640

Direct labor hours = $21.09 per direct labor hour

Standard time to produce goods :

= Budgeted direct labor hours  ÷ Production volume

= 640 ÷ 6,400

= 0.10 hours

VOH Efficiency Variance

= ( SH − AH ) × SR

where,

SH are standard direct labor hours allowed

AH are the actual direct labor hours

SR is the standard variable overhead rate

(SH − AH ) × SR

= [(4,200 × 0.10) - 485] × $21.09

= (420 - 485) × $21.09

= 1,370.85 Unfavorable