Question

Pippin Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate
Direct materials 5.0 grams $7.00 per gram
Direct labor 0.30 hours $21.30 per hour
Variable manufacturing overhead 0.30 hours $9.60 per hour
The company has reported the following actual results for the product for June:
Actual output 8,500 units
Raw materials purchased 48,100 grams
Actual price of raw materials $7.70 per gram
Raw materials used in production 42,490 grams
Actual direct labor-hours 2,300 hours
Actual direct labor rate $21,70 per hour
Actual variable overhead rate $9.80 per hour
The variable overhead efficiency variance for the month is closet to:_________.
a. $2,450 F
b. $2,400 U
c. $2,400 F
d. $2,450 U

Answer 1

c. $2,400 F

Step-by-step explanation:

The computation of the variable overhead efficiency variance for the month is shown below:

= Variable manufacturing overhead per hour × (actual direct labor hours - actual output × 0.30 hours)

= $9.6 × (2,300 - 8,500 × 0.3)

= $2,400 Favorable

Hence, the correct option is c.