Question

Bondi Corporation makes automotive engines. For the most recent month, budgeted production was 3,500 engines. The standard power cost is $1.50 per machine-hour. The company's standards indicate that each engine requires 11.3 machine-hours. Actual production was 3,800 engines. Actual machine-hours were 41,340 machine-hours. Actual power cost totaled $66,642.

Required:

Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

	Variable overhead rate variance Variable overhead efficiency variance

Bulluck Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate
Direct materials		3.70	grams	$	1.20	per gram
Direct labor		0.90	hours	$	13.00	per hour
Variable overhead		0.90	hours	$	2.20	per hour

The company reported the following results concerning this product in July.

Actual output		3,200	units
Raw materials used in production		11,570	grams
Actual direct labor-hours		2,600	hours
Purchases of raw materials		12,300	grams
Actual price of raw materials purchased	$	1.40	per gram
Actual direct labor rate	$	11.60	per hour
Actual variable overhead rate	$	2.30	per hour

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 July is:

Multiple Choice

• $644 U

• $616 F

• $644 F

• $616 U

Answer 1

Data Varaible OH Standard Rate Standard hours per unit Standard Hours for Actual output Actual Output Actual hours Worked Actual Rate =66642/41340 AR Answer: Variable Overhead Rate Variance AH*(AR-SR)= 41340*(1.61-1.50) Overhead Efficiency Varaince (AH*SR)-(SH*SR)= (41340-42940)*1.50 1.50 Per hour 11.30 Hours 42940 Hours 3800 units 41340 Hours 1.61 AH 4632 U 2400 F

SH Varaible OH Standard Rate SR Standard hours per unit Standard Hours for Actual output Actual Output Actula hours Answer:$ 616 F Overhead Efficiency Varaince (AH*SR)-(SH*SR)= (2600-2880)*2.20 2.20 Per hour 0.90 hours 2880 Hours 3200 Units 2600 hours AH 616 Favorable