Question

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead efficiency variance.

Direct labor standard (2 hrs. @ $12.40/hr.)	$	24.80		per finished unit
Actual direct labor hours		96,500		hrs.
Budgeted units		56,000		units
Actual finished units produced		47,500		units
Standard variable OH rate (2 hrs. @ $15.00/hr.)	$	30.00		per finished unit
Standard fixed OH rate ($526,400/56,000 units)	$	9.40		per unit
Actual cost of variable overhead costs incurred	$	1,417,000
Actual cost of fixed overhead costs incurred	$	530,000

Multiple Choice

• $210,000 unfavorable.

• $22,500 favorable.

• $8,000 unfavorable.

• $8,000 favorable.

• $22,500 unfavorable.

Answer 1

Standard overhead rate = $15 per hour

Actual direct labor hours = 96,500 hours

Standard hour per unit = 2

Actual output = 47,500

Standard hour for actual output = 47,500 x 2

= 95,000

variable overhead efficiency variance = Standard overhead rate x (Actual direct labor hours - Standard hour for actual output)

= 15 x (96,500 - 95,000)

= $22,500 (Unfavorable)

Fifth option is the correct option

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