Question

John Williams, manager of Phoenix Entertainment, wants to compute the variable overhead efficiency variance for the year. He has the following details:

Variable overhead flexible budget variance (unfavorable)
$23,625
Budgeted input quantity allowed for actual output
$9,000
Actual input quantity used of cost-allocation base used
10,125 units
Budgeted variable overhead cost per unit of cost-allocation base
$30
Actual variable overhead cost per unit of cost-allocation base
$29

What will be the variable overhead spending variance for the year?
10125 favorable

Which of the following statements best describe variable overhead efficiency variance?
(Actual quantity of the cost-allocation base used - Budgeted quantity of the cost-allocation base that should have been used to produce the actual output) × Budgeted variable overhead cost per unit of the cost-allocation base

Answer 1

$10,125 Favorable

Actual quantity of the cost-allocation base used - Actual quantity of the cost-allocation base that should have been used to produce the actual output) × Budgeted variable overhead cost per unit of the cost-allocation base

Step-by-step explanation:

Variable overhead spending variance = Actual Spending - budgeted Spending based on actual quantity

Variable overhead spending variance = (Actual Input x Actual rate) - ( Actual input x Budgeted rate)

Variable overhead spending variance = (10,125 x $29) - ( 10,125 x $30)

Variable overhead spending variance = $293,625 - $303,750

Variable overhead spending variance = $10,125 Favorable

Variable overhead spending variance is

Actual quantity of the cost-allocation base used - Actual quantity of the cost-allocation base that should have been used to produce the actual output) × Budgeted variable overhead cost per unit of the cost-allocation base