Question

The management of Kartoush Enterprises is analyzing variable overhead variances for the fiscal period just ended....

The management of Kartoush Enterprises is analyzing variable overhead variances for the fiscal period just ended. During the period, Kartoush’s management used 5,000 hours of direct labor. It had budgeted to use 8,000 hours of direct labor. Hours of direct labor is the single overhead driver of variable overhead. Variable overhead consists of two items. Indirect labor was budgeted as $2.00 per hour of direct labor. Indirect materials was budgeted as $1.00 per hour of direct labor. Actual variable overhead was $30,000. Required: Calculate Kartoush's variable overhead efficiency variance.

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Answer #1

Answer:

Variable overhead efficiency variance = $ 9,000 F

Calculation:

It is given that:

Standard Rate $ 3.00
Standard hours 8,000
Actual rate $ 6.00 $ 30000 / 5000
Actual hours 5,000

Now,

Variable Overhead Efficiency Variance = (Standard hours - Actual hours) * Standard rate
Variable Overhead Efficiency Variance = (8000 - 5000) * $ 3
Variable Overhead Efficiency Variance = $ 9,000 Favorable

In case of any doubt, please feel free to comment.

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