Gildon Corporation produces metal telephone poles. In the most recent month, the

Question

Gildon Corporation produces metal telephone poles. In the most recent month, the company budgeted production of 7,200 poles. Actual production was 7,600 poles. According to standards, each pole requires 6.5 machine-hours. The actual machine-hours for the month were 49,890 machine-hours. The budgeted indirect labor is $1.20 per machine-hour. The actual indirect labor cost for the month was $56,408. The variable overhead efficiency variance for indirect labor is:

a. $588 U b. $2,872 F c. $588 F d. $2,872 U

Explanation / Answer

Variable overhead cost absorbed = actual output * budgeted rate = 7,600 * (6.5*$1.20 ) = 59280 Standard variable overhead cost = standard output for actual indirect labor cost * budgeted rate = 56,408 variable overhead efficiency variance for indirect labor = 59280-56,408 = $2,872 Anaswer : B) $2,872 F

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