Question

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company uses machine-hours as its measure of activity.

Standard Hours per Unit of Output 8.1 machine hours
Standard Variable Overhead Rate $14.30 per machine hour
The following data pertain to operations for the last month:
Actual Hours 1,700 machine hours
Actual Total Variable Overhead Cost $24,905
Actual Output 200 units
What is the variable overhead efficiency variance for the month?
a. $567 favourable.
b. $1,144 unfavourable.
c. $1,172 favourable.
d. $1,172 unfavourable.

Answer 1

b. $1,144 unfavourable.

Step-by-step explanation:

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

= (Actual Hours - Standard Hours) × Standard rate per hour

=(1,700 - 8.1 × 200 units) × $14.30

= 80 × $14.30

= $1,144 unfavorable

hence, the variable overhead efficiency variance is $1,144 unfavorable

Therefore the option b is correct