Question

26. Your company has decided to allocate variable manufacturing overhead based on machine hours. Here is your company’s data and your company uses a standard costing system.

Budgeted output units 62,000 units

Budgeted machine-hours 38,750 hours

Budgeted variable manufacturing overhead costs for 38,750 hours $348,750

Actual output units produced 33,000 units

Actual machine-hours used 23,300 hours

Actual variable manufacturing overhead costs $384,000

What is the variable overhead rate variance and the variable overhead efficiency variance, rounded? Negative numbers denote a negative variance, positive numbers denote a positive variance.

Select one:

a. $174,299, ($24,074)

b. $(174,299), ($24,074)

c. $(174,299), $24,074

d. None of the choices are correct.

e. $174,299, $24,074

Answer 1

Variable overhead efficiency variance

=Standard overhead rate x (Actual hours - Standard hours)

= (348,750/38,750)×(23,300-(38,750/62,000*33,000))

= $24,075

Note that standard hours are adjusted as to actual units.

Variable overhead rate variance

= Actual cost - ( Actual hours × Standard rate)

= 384,000-(23,300*(348,750/38,750))

= $174,300

So e option

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