Question

Tidd Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 4.7 grams $2.00 per gram $9.40 Direct labor 0.6 hours $17.00 per hour $10.20 Variable overhead 0.6 hours $2.00 per hour $1.20 The company reported the following results concerning this product in November. Originally budgeted output 9,700 units Actual output 8,800 units Raw materials used in production 44,890 grams Purchases of raw materials 47,380 grams Actual direct labor-hours 7,950 hours Actual cost of raw materials purchases $132,520 Actual direct labor cost $125,213 Actual variable overhead cost $14,406 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 November is:

Answer 1

Answer :-

The variable overhead efficiency variance for November is $5,340 Unfavorable

Explanation -

Variable overhead efficiency variance = (AH - SH) × SR

Actual hours (AH) = 7,950 hours

Standard Hour (SH) = Actual Output × Standard hours per unit

Standard Hour (SH) = 8,800 × 0.6 hours = 5,280 hours

Standard Rate (SR) = $2 per hour

Variable Overhead Efficiency variance = (7,950 hours - 5,280 hours ) × $2 per unit

Variable Overhead Efficiency variance = $5,340 Unfavorable