Question

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours.
Standard hours per unit of output 5.30 DLHs
Standard variable overhead rate $ 11.66 per DLH
The following data pertain to operations for the last month:
Actual direct labor-hours 8,800 DLHs
Actual total variable manufacturing overhead cost $ 96,000
Actual output 1,500 units
What is the variable overhead efficiency variance for the month?
a. $6,883 U
b. $6,883 F
c. $9,911 U
d. $3,252 U

Answer 1

Answer:

Variable overhead efficiency variance= $9,911 unfavorable

Explanation:

Giving the following information:

Standard hours per unit of output 5.30 DLHs

Standard variable overhead rate $ 11.66 per DLH

Actual direct labor-hours 8,800 DLHs

Actual output 1,500 units

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= 5.3*1,500= 7,950

Variable overhead efficiency variance= (7,950 - 8,800)*11.66

Variable overhead efficiency variance= $9,911 unfavorable