Question

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead efficiency variance. Direct labor standard (2 hrs. @ $12.75/hr.) $25.50 per finished unit Actual direct labor hours 81,500 hrs. Budgeted units 42,000 units Actual finished units produced 40,000 units Standard variable OH rate (2 hrs. @ $14.30/hr.) $28.60 per finished unit Standard fixed OH rate ($336,000/42,000 units) $8.00 per unit Actual cost of variable overhead costs incurred $1,140,000 Actual cost of fixed overhead costs incurred $338,000
$14,300 unfavorable.

$21,450 favorable.

$4,000 unfavorable.

$4,000 unfavorable.

$21,450 unfavorable.

Answer 1

Answer:

$21,450 unfavorable.

Explanation:

Given:

Direct labor standard = 2 hrs @ $12.75/hr = $25.50

Actual direct labor hours = 81,500 hrs

Budgeted units = 42,000 units

Actual finished units produced = 40,000 units

Standard variable Overhead rate = (2 hrs. @ $14.30/hr.) = $28.60

Standard fixed OH rate = $8.00 per unit

Actual cost of variable overhead costs incurred = $1,140,000

Actual cost of fixed overhead costs incurred = $338,000

Now,

The standard hours for actual output

= Direct labor standard hours × Actual finished units produced

= 2 × 40,000

= 80,000 hours

now,

The variable overhead efficiency is calculated as:

= Standard variable OH rate × ( standard hours for actual output - Actual direct labor hours)

= $14.30/hr × ( 80,000 - 81,500 )

= - $21,450

here, negative sign depicts the unfavorable

Hence,

The answer is $21,450 unfavorable.