SCENARIO 2 VARIABLE MOH VARIANCE ANALYSES Roberts Corporation manufactured 100,0

Question

SCENARIO 2 VARIABLE MOH VARIANCE ANALYSES

Roberts Corporation manufactured 100,000 buckets during February. The overhead cost-allocation base is $5.00 per machine-hour. The following variable overhead data pertain to February:

                                                                       Actual        Budgeted

Production                                          100,000 units 100,000 units

Machine-hours                                      9,800 hours   10,000 hours

Variable overhead cost per machine-hour     $5.25               $5.00

e.    What is February’s variable overhead spending variance?

f.     What is February’s variable overhead efficiency variance?

Explanation / Answer

e.    What is February’s variable overhead spending variance?

Actual hours worked x (Actual overhead rate - Budgeted overhead rate)
= Variable overhead spending variance = 9,800(5.25-5) = $2,450

f.     What is February’s variable overhead efficiency variance?

Budgeted overhead rate x (Actual hours - Budgeted hours)
= Variable overhead efficiency variance = 5.25*(9,800-10,000) = $50

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