Question

Priority Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 9,000 Actual variable overhead incurred: $54,400 Actual machine hours worked: 16,000 Standard variable overhead cost per machine hour: $3.50 If Priority estimates two hours to manufacture a completed unit, the company's variable-overhead efficiency variance is:

Answer 1

Variable overhead efficiency variance= $7,000 favorable

Step-by-step explanation:

Giving the following information:

Actual units produced: 9,000

Actual machine hours worked: 16,000

Standard variable overhead cost per machine hour: $3.50

Standard hours= 2 hours per unit

To calculate the variable overhead efficiency variance, we need to use the following formula:

Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate

Standard quantity= 2*9,000= 18,000

Variable overhead efficiency variance= (18,000 - 16,000)*3.5

Variable overhead efficiency variance= $7,000 favora