Question

Pearle Corporation makes automotive engines. For the most recent month, budgeted production was 3,300 engines. The standard power cost is $9.20 per machine-hour. The company's standards indicate that each engine requires 2.1 machine-hours. Actual production was 3,400 engines. Actual machine-hours were 7,160 machine-hours. Actual power cost totaled $61,815.

Required:
a) Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable. (Input all amounts as positive values.)

Answer 1

Rate variance = $4057 Favorable

Efficiency variance = $184 unfavorable

Explanation:

Rate variance $

7,160 hours should have cost (7,160 × $9.20) 65872

bur did cost (actual cost) 61,815

Rate variance 4057 Favorable

Efficiency variance

3400 units should have taken (3,400 × 2.1 hours) 7140

but did take 7,160

Efiicienct=y varince (hours) 20 unfavorable

standard hour ×$9.20

Efficiency variance $184 unfavorable

Rate variance = $4057 Favorable

Efficiency variance = $184 unfavorable