Termeer Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The company has reported the following actual results for the product for August:
The variable overhead efficiency variance for the month is closest to:

A) $46 Unfavorable
B) $42 Favorable
C) $46 Favorable
D) $42 Unfavorable

Question

Termeer Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

The company has reported the following actual results for the product for August:

The variable overhead efficiency variance for the month is closest to:

A) $46 Unfavorable
B) $42 Favorable
C) $46 Favorable
D) $42 Unfavorable

Rahaf Yassin · Accepted Answer

Final Answer : C, Explanation :  Variable overhead efficiency variance = (Actual hours - Standard hours) x Variable overhead rateActual hours = 2,600Standard hours = 2,500Variable overhead rate = $0.40 per direct labor hourVariable overhead efficiency variance = (2,600 - 2,500) x $0.40 = $40 FavorableTherefore, the closest answer choice is C, $46 Favorable.

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