Question

Juhasz Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or HoursStandard Price or Rate Direct labor 0.50hours$23.00per hour Variable overhead 0.50hours$4.30per hour In August the company produced 8,200 units using 4,250 direct labor-hours. The actual variable overhead cost was $17,000. The company applies variable overhead on the basis of direct labor-hours. The variable overhead efficiency variance for August is: Multiple Choice $645 U $600 U $600 F $645 F

Answer 1

Efficiency variance $645 unfavorable

Step-by-step explanation:

Variable overhead efficiency variance: A variance is the difference between a standard cost and the actual cost. Variable overhead efficiency variance aims to determine whether or not their exist savings or extra cost incurred on variable overhead as a result of workers being faster or slower that expected.

Since the variable overhead is charged using labour hours, any amount by which the actual labour hours differ from the standard allowable hours would result in a variance

To calculate this variance, we do as follows:

Hours

8,200 units should have taken (8,200 × 0.50 hrs) 4,100

but did take 4,250

Variance in hours 150 unfavorable

Standard rate × $4.30

Efficiency variance $645 unfavorable