Opal Production Company uses a standard costing system. The following informatio

Question

Opal Production Company uses a standard costing system. The following information pertains to the current year: Actual factory overhead costs ($15,000 is fixed) $50,000 Actual direct labor costs (10,000 hours) $130,000 Standard direct labor for 6,000 units: Standard hours allowed 9,500 hours Labor rate $10.00 The factory overhead rate is based on an activity level of 12,000 hours. Standard cost data for 6,000 units is as follows: Variable factory overhead $18,000 Fixed factory overhead 12.000 Total factory overhead $30.000 What is the variable overhead efficiency variance for Opal Production Company?

Explanation / Answer

Variable overhead efficiency variance for Opal production company is below

Variance = (10000 hours- 9500 hours)*($18000/12000)

= 500 hours *$1.5

= $750 Unfavorable

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