Question

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours.

Standard hours per unit of output		3.90	DLHs
Standard variable overhead rate	$	11.25	per DLH

The following data pertain to operations for the last month:

Actual direct labor-hours		8,800	DLHs
Actual total variable manufacturing overhead cost	$	95,850
Actual output		2,200	units

What is the variable overhead efficiency variance for the month?

Multiple Choice

• $2,475 U

• $7,513 F

• $2,692 U

• $7,513 U

Answer 1

Actual labor hours = 8,800 units

Standard labor hours = Actual output x Standard hours per unit of output

= 2,200 x 3.90

= 8,580

Variable overhead efficiency variance = Actual labor hours - Standard labor hours) x hourly rate for standard variable overhead,

= ( 8,800-8,580) x 11.25

= $2,475 Unfavorable

First option is correct option.

Kindly comment if you need further assistance. Thanks‼!