Hermansen Corporation produces large commercial doors for warehouses and other facilities. In the most recent month, the company budgeted production of 5,100 doors. Actual production was 5,400 doors. According to standards, each door requires 3.8 machine-hours. The actual machine-hours for the month were 20,880 machine-hours. The standard supplies cost is $7.90 per machine-hour. The actual supplies cost for the month was $152,063. Supplies cost is an element of variable manufacturing overhead. The variable overhead efficiency variance for supplies cost is:

A) $10,045 Favorable
B) $10,045 Unfavorable
C) $2,844 Favorable
D) $2,844 Unfavorable

Question

Jashanpal Singh Bajwa · Accepted Answer

Final Answer : D, Explanation :  The variable overhead efficiency variance is calculated as (Actual Machine-Hours - Standard Machine-Hours) x Standard Rate. The standard machine-hours for actual production are 5,400 doors x 3.8 hours/door = 20,520 hours. The difference between actual machine-hours (20,880) and standard machine-hours (20,520) is 360 hours. The standard rate is $7.90 per machine-hour. Therefore, the variance is 360 hours x $7.90/hour = $2,844 Unfavorable, because actual hours exceeded standard hours.

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