Asked by Milton Hernandez on Jun 16, 2024
Verified
Bondi Corporation makes automotive engines. For the most recent month, budgeted production was 1,500 engines. The standard power cost is $3.10 per machine-hour. The company's standards indicate that each engine requires 9.3 machine-hours. Actual production was 1,800 engines. Actual machine-hours were 15,860 machine-hours. Actual power cost totaled $51,593.Required:Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable.
Machine-Hours
A measure of production output or activity based on the number of hours a machine is operated within a given period.
Power Cost
Power cost refers to the expenditure associated with the consumption of electrical energy by a company or an individual.
Automotive Engines
The power units of vehicles, designed to convert fuel into mechanical energy to enable motion.
- Find out the variable overhead rate and assess the discrepancies in efficiency.
- Assess the implications of variances, distinguishing between beneficial and harmful ones.
Verified Answer
BW
Breshay WaltonJun 22, 2024
Final Answer :
Variable overhead rate variance = (Actual hours × Actual rate) − (Actual hours × Standard rate)= $51,593 − (15,860 hours × $3.10 per hour)= $51,593 − $49,166= $2,427 UnfavorableStandard machine-hours allowed for the actual output = 9.3 hours per unit × 1,800 units = 16,740 hoursVariable overhead efficiency variance = (Actual hours − Standard hours) × Standard rate= (15,860 hours − 16,740 hours) × $3.10 per hour= (−880 hours) × $3.10 per hour= $2,728 Favorable
Learning Objectives
- Find out the variable overhead rate and assess the discrepancies in efficiency.
- Assess the implications of variances, distinguishing between beneficial and harmful ones.
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