Question

Mongar Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: Original Budget Actual Costs Variable overhead costs: Supplies $ 7,980 $ 8,230 Indirect labor 29,820 29,610 Total variable manufacturing overhead cost $ 37,800 $ 37,840 The original budget was based on 4,200 machine-hours. The company actually worked 4,350 machine-hours during the month and the standard hours allowed for the actual output were 4,190 machine-hours. What was the overall variable overhead efficiency variance for the month

Answer 1

Answer:

Variable overhead variance  = $1,440 unfavorable

Explanation:

The variable overhead efficiency variance is the difference between the actual hours and the standard hours for the actual output valued at the standard variable overhead rate per hour.

                                                                   Machine hours

standard hours for the actual output       4,190

Actual hours                                               4,350

Efficiency variance                                        160 unfavorable

Standard rate per hour(see note)              ×  $9      

Variable overhead variance                       1,440 unfavorable

                       

Standard variable rate per machine hour

= Budgeted overhead cost/Budgeted machine hour s

= $37,800/4,200 hours =$9 per machine hour

Variable overhead variance  = $1,440 unfavorable