Question

Mongar Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below:

Original Budget Actual Costs
Variable overhead costs:
Supplies $7,980 $8,230
Indirect labor 29,820 29,610
Total variable manufacturing overhead cost $37,800 $37,840

The original budget was based on 4,200 machine-hours. The company actually worked 4,350 machine-hours during the month and the standard hours allowed for the actual output were 4,190 machine-hours. What was the overall variable overhead efficiency variance for the month?

a. $130 Unfavorable
b. $950 Favorable
c. $1,440 Unfavorable
d. $1,310 Favorable

Answer 1

c. $1,440 Unfavorable

Step-by-step explanation:

Variable overhead efficiency variance = (Standard hours - Actual working hours) * Standard Rate

Variable overhead efficiency variance = ($4,190 hours - $4,350 hours)*($37,800/4,200 hours)

Variable overhead efficiency variance = ($4,190 hours - $4,350 hours)*$9 per hour

Variable overhead efficiency variance = 160 hours*$9 per hour

Variable overhead efficiency variance = $1,440 Unfavorable