Asked by Mugan Tayalan on Jul 27, 2024
Verified
The variable overhead efficiency variance is?
A) $520 U.
B) $520 F.
C) $500 U.
D) $500 F.
Variable Overhead Efficiency Variance
The difference between the actual variable overhead incurred and the expected (standard) variable overhead based on the efficient usage of manufacturing resources.
Direct Material Used
The raw materials that are directly included in the finished product, easily traceable to specific goods or batches of goods.
Variable Manuf. Overhead
Expenses associated with manufacturing that vary directly with the level of production output, such as materials and utilities.
- Determine the financial discrepancies in material, labor, and variable overhead expenditures, considering price, quantity, efficiency, and expenditure variances.
- Highlight the differences between favorable and unfavorable financial variations and their effects on budgetary practices and cost control measures.
Verified Answer
HJ
Hamza JavedJul 30, 2024
Final Answer :
D
Explanation :
The variable overhead efficiency variance is calculated as the difference between the actual hours worked and the standard hours allowed for the actual production, multiplied by the standard variable overhead rate per hour. The standard hours allowed for the actual production (600 units) is 2 hours per unit * 600 units = 1,200 hours. The actual hours worked are 1,100 hours. The standard variable overhead rate is $5 per hour. Therefore, the variable overhead efficiency variance is (1,200 hours - 1,100 hours) * $5/hour = 100 hours * $5/hour = $500 favorable, since actual hours worked are less than the standard hours allowed, indicating efficient use of labor hours in relation to the variable overhead.
Learning Objectives
- Determine the financial discrepancies in material, labor, and variable overhead expenditures, considering price, quantity, efficiency, and expenditure variances.
- Highlight the differences between favorable and unfavorable financial variations and their effects on budgetary practices and cost control measures.