Asked by Karen Montenegro on Apr 25, 2024
Verified
Ravena Labs., Incorporated makes a single product which has the following standards:Direct materials: 2.5 ounces at $20 per ounceDirect labor: 1.4 hours at $12.50 per hourVariable manufacturing overhead: 1.4 hours at 3.50 per hourVariable manufacturing overhead is applied on the basis of standard direct labor-hours. The following data are available for October:3,750 units of compound were produced during the month.There was no beginning direct materials inventory.Direct materials purchased: 12,000 ounces for $225,000.The ending direct materials inventory was 2,000 ounces.Direct labor-hours worked: 5,600 hours at a cost of $67,200.Variable manufacturing overhead costs incurred amounted to $18,200.Variable manufacturing overhead applied to products: $18,375.The variable overhead efficiency variance for October is:
A) $1,400 Favorable
B) $1,225 Unfavorable
C) $1,900 Unfavorable
D) $2,700 Favorable
Variable Overhead
Costs of production that fluctuate with the level of output, including items such as utilities and materials that are not directly linked to a single product.
Efficiency Variance
The difference between the actual amount of an input used and the amount that was expected to be used, measured in financial terms.
- Acquire insight into the evaluation and importance of variable manufacturing overhead variances, focusing on both efficiency and rate variations.
Verified Answer
Variable overhead applied = 1.4 x 5,600 x $3.50 = $28,560
Variable overhead spending variance = Actual variable overhead - Budgeted variable overhead = $18,200 - $28,560 = $10,360 unfavorable
Variable overhead efficiency variance = Budgeted variable overhead - Applied variable overhead = $28,560 - $18,375 = $10,185 unfavorable
Therefore, the variable overhead efficiency variance for October is $1,225 unfavorable (Option B).
Learning Objectives
- Acquire insight into the evaluation and importance of variable manufacturing overhead variances, focusing on both efficiency and rate variations.
Related questions
Dirickson Incorporated Has Provided the Following Data Concerning One of ...
Bulluck Corporation Makes a Product with the Following Standard Costs ...
Dirickson Incorporated Has Provided the Following Data Concerning One of ...
Majer Corporation Makes a Product with the Following Standard Costs ...
Puvo, Incorporated, Manufactures a Single Product in Which Variable Manufacturing ...