Question

Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 4,500 machine-hours. Budgeted and actual overhead costs for the month appear below: Original Budget Based on 4,500 Machine-Hours Actual Costs Variable overhead costs: Supplies $ 12,000 $ 12,730 Indirect labor 38,400 38,700 Fixed overhead costs: Supervision 20,600 20,240 Utilities 6,800 6,760 Factory depreciation 7,800 8,110 Total overhead cost $ 85,600 $ 86,540 The company actually worked 4,520 machine-hours during the month. The standard hours allowed for the actual output were 4,510 machine-hours for the month. What was the overall variable overhead efficiency variance for the month

Answer 1

Variable overhead efficiency variance= $112 unfavorable

Step-by-step explanation:

Giving the following information:

Estimated budget:

4,500 Machine-Hours

Supplies $ 12,000

Indirect labor 38,400

Total= $50,400

The company worked 4,520 machine-hours during the month.

The standard hours allowed for the actual output were 4,510 machine-hours for the month.

First, we need to calculate the predetermined variable overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 50,400/4,500

Predetermined manufacturing overhead rate= $11.2 per machine hour

Now, to calculate the variable overhead efficiency variance, we need to use the following formula:

Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate

Variable overhead efficiency variance= (4,510 - 4,520)*11.2

Variable overhead efficiency variance= $112 unfavorable