Question

Valera Corporation makes a product with the following standards for labor and variable overhead: Direct labor Variable overhead Standard Quantity or Hours 0.4 hours 2.4 hours Standard Price or Rate $21.ee per hour $ 6.00 per hour Standard Cost Per Unit $8.40 $2.40 The company budgeted for production of 5,300 units in July, but actual production was 5,400 units. The company used 2,130 direct labor-hours to produce this output. The actual variable overhead rate was $6.10 per hour. The company applies variable overhead on the basis of direct labor-hours. The variable overhead efficiency variance for July is: Multiple Choice

Answer 1

Ans: $ 180 Unfavorble

Explanation:

Variable Overhead Efficiency Variance For July is:

= ( Actual Hour - Standard Hour) × Standard Rate

= ( 2130 hour - 2160 hour) × $ 6.00 per hour

= $ 180 Favorble

Note:

1) Standard hour:

= 5400 unit × 0.4 hour

= 2160 hour

2) Variance is favorble because actual hour are less than that of'the standard hour.