Granite Cutters, Inc. manufactures granite lawn fixtures. The standard and actua

Question

Granite Cutters, Inc. manufactures granite lawn fixtures. The standard and actual costing information is provided below. Granite Cutters uses direct labor hours to allocate overhead.

Calculate Granite Cutters’ variable manufacturing overhead spending variance and variable overhead efficiency variance and enter them in the boxes below. Also specify whether each variance is favorable or unfavorable.

Standard Price and Quantities
Labor 8.0 DL hours per unit
$14.00 per DL hour
Variable Overhead Application Rate $5.00 per DL hour

Budgeted and Actual Information
Planned Production 100 units
Actual Production 120 units

DL Hours Used 1,000 hours
DL Hours Budgeted for Period 800 hours
Actual DL Cost $13,500

Actual Variable Manufacturing Overhead $5,250
Actual Fixed Overhead $9,000
Total Budgeted Fixed Overhead $7,500

Explanation / Answer

spending variance = actual - (actual hours x standard variable rate) = 5250 - (1000 x 5) = 5250 - 5000 = 250 unfavorable. efficiency variance = standard variable rate x (actual hours - standard hours ) = 5.00 (1000-960) = 5.00 x 40 = 200 unfavorable

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