Question

The Vienna Company, which manufactures violins, has established the following standard cost per violin:

Standard Qty/Hours Standard Price/Rate Standard Cost

Direct material 3 pounds $4.00 per pound $12.00/violin

Direct labor 2 hours $8.00 per hour $16.00/violin

Variable mfg overhead 2 hours $5.00 per hour $10.00/violin Vienna produced 600 violins.

To produce the violins, employees worked 1,100 direct labor hours and total variable manufacturing overhead spending was $5,720. Variable manufacturing overhead is based upon direct labor hours. Vienna's variable overhead rate variance is:
a.)$240 Favorable
b.)$220 Favorable
c.)$240 Unfavorable
d.)$220 Unfavorable

To produce the violins, employees worked 1,100 direct labor hours and total variable manufacturing overhead spending was $5,720. Variable manufacturing overhead is based upon direct labor hours. Vienna's variable overhead efficiency variance is:

a.)500 Favorable
b.)520 Favorable
c.)500 Unfavorable
d.)520 Unfavorable

Answer 1

1. Variable overhead Spending Variance = Actual hours worked* Difference between actual cost per hour and standard cost per hour

= AH(AR-SR)

=1100(5.2^*-5)

= $220 Unfavorable

Option D is correct.

Note: *$5720/1100=$5.2

2)Variable Overhead Efficiency Variance = Difference between Actual hours worked and standard hours allowed*Standard cost

= SR(AH-SH)

=$5(1100-1200^*)

= $500 Favorable

Option A is Correct

Note: * Standard hours allowed = 600violins*2hours per Violin=1200hours