Zero Company\'s standard factory overhead rate is $3.69 per direct labor hour (D

Question

Zero Company's standard factory overhead rate is $3.69 per direct labor hour (DLH), calculated at 88.00% capacity = 870 standard DLHs. In December, the company operated at 78.00% of capacity, or 771 standard DLHs. Budgeted factory overhead at 78.00% of capacity is $3,078, of which $1,331 is fixed overhead. For December, the actual factory overhead cost was $3,740 for 811 actual DLHs, of which $1,260 was for fixed factory overhead. Assuming a four-variance breakdown (decomposition) of the total overhead variance, what is the fixed factory overhead efficiency variance for the period? $90 unfavorable N/A—this variance does not exist. $643 unfavorable $151 unfavorable $813 unfavorable Zero Company's standard factory overhead rate is $3.69 per direct labor hour (DLH), calculated at 88.00% capacity = 870 standard DLHs. In December, the company operated at 78.00% of capacity, or 771 standard DLHs. Budgeted factory overhead at 78.00% of capacity is $3,078, of which $1,331 is fixed overhead. For December, the actual factory overhead cost was $3,740 for 811 actual DLHs, of which $1,260 was for fixed factory overhead. Assuming a four-variance breakdown (decomposition) of the total overhead variance, what is the fixed factory overhead efficiency variance for the period? $90 unfavorable N/A—this variance does not exist. $643 unfavorable $151 unfavorable $813 unfavorable

Explanation / Answer

Budgeted hours in December 771 Fixed factory overheads 1331 Budgeted FOH rate per hour 1331/771 1.726 Factory FOH efficiency variance : Actual Hours 811 Budgeted FOH rate per hour 1.726 Budgeted cost for actual hours worked 811*1.726 A 1399.786 Actual FOH B 1260.00 FOH efficiency variance (favorable) A-B 139.786

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