Question

38) Osium Company made the following journal entry:

Variable Manufacturing Overhead Allocated 200,000
Variable Manufacturing Overhead Efficiency Variance 60,000
Variable Manufacturing Overhead Control 250,000
Variable Manufacturing Overhead Spending Variance 10,000

Which of the following statements is true of the given journal entry?
A) Osium overallocated variable manufacturing overhead.
B) A $10,000 unfavorable spending variance was recorded.
C) Work-in-Process is currently overstated.
D) A $60,000 unfavorable efficiency variance was recorded.

Answer 1

d. The given journal entry indicates a $60,000 unfavorable efficiency variance was recorded.

Step-by-step explanation:

The given journal entry indicates that the company has allocated $200,000 of variable manufacturing overhead, recorded a $60,000 efficiency variance, and recorded a $10,000 spending variance. From this information, we can conclude that option D) A $60,000 unfavorable efficiency variance was recorded is true.

The efficiency variance measures the difference between the actual hours and the standard hours for the actual output produced. If the variance is unfavorable, it means that the actual hours were higher than the standard hours, indicating inefficiency in the production process.