Tharaldson Corporation makes a product with the following standard costs:
| Standard Quantity or Hours | Standard Price or Rate | Standard Cost Per Unit | |||||||
| Direct materials | 6.8 | ounces | $ | 4.00 | per ounce | $ | 27.20 | ||
| Direct labor | 0.5 | hours | $ | 12.00 | per hour | $ | 6.00 | ||
| Variable overhead | 0.5 | hours | $ | 7.00 | per hour | $ | 3.50 | ||
The company reported the following results concerning this product in June.
| Originally budgeted output | 2,200 | units | |
| Actual output | 2,700 | units | |
| Raw materials used in production | 16,900 | ounces | |
| Purchases of raw materials | 18,000 | ounces | |
| Actual direct labor-hours | 530 | hours | |
| Actual cost of raw materials purchases | $ | 45,000 | |
| Actual direct labor cost | $ | 12,200 | |
| Actual variable overhead cost | $ | 3,100 | |
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
The variable overhead efficiency variance for June is:
Multiple Choice
$5,740 U
$5,740 F
$6,150 F
$6,150 U
Answer
$5,740 F
Calculations:
Given:
| Standard rate | $ 7.00 |
| Standard hours (2700*0.5) | 1,350 |
| Actual rate | $ 5.85 |
| Actual hours | 530 |
Formula:
| Variable Overhead efficiency Variance = (Standard hours -Actual hours)*Standard rate |
| Variable Overhead efficiency Variance = (1350 - 530) * $ 7 |
| Variable Overhead efficiency Variance = 5740 (F) |
Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price...