Question

Absolute Systems allocates manufacturing overhead based on machine hours. Each connector should require 5 machine hours. According to the static budget, Absolute expected to incur the following (Click the icon to view the static budget information) During August, Absolute actually used 500 machine hours to make 120 connectors and spent $5,000 in variable manufacturing costs and 58,000 in fored manufacturing overhead costs Calculate the variable overhead efficiency variance for Absolute More info O A. $7,000 F OB. 55,000 OC. 53,000 F OD. $2.000 F 400 machine hours per month (0 connectors x 5 machine hours per connector) 50,000 in variable manufacturing overhead costs 57.250 in fred manufacturing overhead costs Print Done Click to select your answer

Answer 1

Solution :

Standard rate of variable overhead = $8,000 / 400 = $20 per machine hour

Standard hours for actual production = 120*5 = 600 machine hours

Actual machine hours = 500

Variable overhead efficiency variance = (SH - AH) * SR = (600 - 500) * $20 = $2,000 F

Hence option D is correct.