Question

Brummer Corporation makes a product whose variable overhead standards are based on direct labor-hours. The quantity standard is 0.20 hours per unit. The variable overhead rate standard is $8.90 per hour. In January the company produced 4,900 units using 1,010 direct labor-hours. The actual variable overhead rate was $8.80 per hour. The variable overhead efficiency variance for January is

Answer 1

-$267

Step-by-step explanation:

To calculate the variable overhead efficiency variance, we need to compare the actual direct labor-hours used to produce the units with the standard direct labor-hours allowed for the actual production.

Given data:

- Quantity standard: 0.20 hours per unit

- Actual production: 4,900 units

- Actual direct labor-hours: 1,010 hours

First, we can calculate the standard direct labor-hours allowed for the actual production:

Standard direct labor-hours allowed = Quantity standard × Actual production

= 0.20 hours per unit × 4,900 units

= 980 hours

Next, we can calculate the variable overhead efficiency variance:

Variable overhead efficiency variance = (Standard direct labor-hours allowed - Actual direct labor-hours) × Variable overhead rate standard

Variable overhead efficiency variance = (980 hours - 1,010 hours) × $8.90 per hour

= (-30 hours) × $8.90 per hour

= -$267

Therefore, the variable overhead efficiency variance for January is -$267. The negative sign indicates that the actual direct labor-hours used exceeded the standard allowed, resulting in unfavorable variance.