Question

Merle Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 4,000 machine-hours. Budgeted and actual overhead costs for the month appear below: Original Budget Based on 4,000 Machine-Hours Actual Costs Variable overhead costs: Supplies $14,000 $13,150 Indirect labor 27,200 24,390 Fixed overhead costs: Supervision 19,900 19,540 Utilities 4,700 4,360 Factory depreciation 8,800 8,620 Total overhead cost $74,600 $70,060 The company actually worked 3,690 machine-hours during the month. The standard hours allowed for the actual output were 3,620 machine-hours for the month. What was the overall variable overhead efficiency variance for the month?

Answer 1

Answer: $721 Unfavorable

Explanation:

The following can be deduced from the question:

Actual hours = 3690 hours

Standard hours = 3620 hours

Standard rate per hour = ($14000 + $27200) / 4000

= $41200 / 4000

= $10.30 per hour

Therefore, the overall variable overhead efficiency variance for the month is calculated as:

= (Actual Hours - Standard Hours) × Standard rate per hour

= (3690 - 3620) × $10.30

= 70 × $10.30

= $721 Unfavorable