Question

Assume the following information appears in the standard cost card for a company that makes only one product: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 5 pounds $ 11.00 per pound $ 55.00 Direct labor 2 hours $ 17.00 per hour $ 34.00 Variable manufacturing overhead 2 hours $ 2.50 per hour $ 5.00 During the most recent period, the following additional information was available: 20,000 pounds of material was purchased at a cost of $10.50 per pound. All of the material that was purchased was used to produce 3,900 units. 8,000 direct labor-hours were recorded at a total cost of $132,000. The actual variable overhead cost incurred during the period was $25,000. Assuming the company uses direct labor-hours to compute its predetermined overhead rate, what is the variable overhead efficiency variance

Answer 1

Answer:

$500 U

Explanation:

From the given information:

Standard hours allowed = 3900 × 2

= 7800 hours

The variable overhead efficiency variance = ( actual hours - standard hours) × standard variable overhead rate

= (8000 -7800) × $2.50

=(200) × $2.50

= $500 U (unfavourable)