Question

Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 5,500 machine-hours. Budgeted and actual overhead costs for the month appear below: Original Budget Based on 5,500 Machine-HoursActual Costs Variable overhead costs: Supplies$12,800 $13,730 Indirect labor 54,300 55,690 Fixed overhead costs: Supervision 21,600 21,240 Utilities 7,800 7,860 Factory depreciation 8,800 9,110 Total overhead cost$105,300 $107,630 The company actually worked 5,590 machine-hours during the month. The standard hours allowed for the actual output were 5,580 machine-hours for the month. What was the overall variable overhead efficiency variance for the month

Answer 1

Answer:

Variable overhead efficiency variance = $798.36  unfavorable

Explanation:

Variable overhead efficiency variance is the difference between the actual time taken to achieve a given production output less the standard hours for same multiplied by the standard variable overhead rate

Since the variable overhead is charged using machine hours, any amount by which the actual labour hours differ from the standard allowable hours would result in a variance  

Overhead absorption rate =Estimated overhead/estimated machine hours

105,300/5,500 machine hours = $19.14 per machine hour

                                                                                              $

5,580 hours should have cost (5,580× 19.14)            106,831.6      

but did cost (actual cost )                                             107,630              

Variable overhead efficiency variance.                     798.36    unfavorable

Variable overhead efficiency variance = $798.36    unfavorable