Question

Majer Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.8	ounces	$	3.00	per ounce	$	20.40
Direct labor		0.4	hours	$	15.00	per hour	$	6.00
Variable overhead		0.4	hours	$	3.00	per hour	$	1.20

The company reported the following results concerning this product in February.

Originally budgeted output		5,400	units
Actual output		8,200	units
Raw materials used in production		30,500	ounces
Actual direct labor-hours		1,950	hours
Purchases of raw materials		32,900	ounces
Actual price of raw materials	$	62.90	per ounce
Actual direct labor rate	$	72.40	per hour
Actual variable overhead rate	$	4.50	per hour

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead efficiency variance for February is:

Answer 1

• Requirement

Variable Overhead Efficiency Variance = $ 3990 Favourable

Variable Overhead Efficiency Variance
(	Standard Hours = 8200 units x 0.4 hours	-	Actual Hours	)	x	Standard Rate
(	3280	-	1950	)	x	$                           3.00
	3990
	Variance		$              3,990.00			Favourable-F