Question

The following standards for variable manufacturing overhead have been established for a company that makes only one product:

Standard hours per unit of output	7.8 hours
Standard variable overhead rate	$12.55 per hour

The following data pertain to operations for the last month:

Actual hours	2,900 hours
Actual total variable overhead cost	$36,975
Actual output	200 units

What was the variable overhead efficiency variance for the month?

Multiple Choice

• $580 unfavourable.
• $17,397 unfavourable.
• $16,817 unfavourable.
• $0.

Answer 1

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Company
Variable overhead
Standard cost of Variable overhead	Amount	Remarks	Note
Actual output	200.00		A
Standard hours per unit of output	7.80		B
Standard hours for Actual output	1,560.00		C=A*B
Standard variable overhead rate	12.55		D
Standard labor cost	19,578.00		E=C*D
Standard cost of Actual hours
Actual hours	2,900.00		F
Standard variable overhead rate	12.55		See E
Standard cost of Actual hours	36,395.00		G=F*E
Efficiency Variance	16,817.00	Unfavorable	H=G-E