A manufacturing company that has only one product has established the following

Question

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. Variable manufacturing overhead standards are based on machine-hours.

Standard hours per unit of output 3.70 machine-hours

Standard variable overhead rate $11.05 per machine-hour

The following data pertain to operations for the last month:

Actual hours 9,000 machine-hours

Actual total variable manufacturing overhead cost $95,830

Actual output 2,200 units

What is the variable overhead efficiency variance for the month?

$3,972 U

$7,073 F

$9,503 U

$7,073 U

Explanation / Answer

Variable overhead efficiency variance = SR [AH -SH]

                                              = 11.05 [9000 - (2200 * 3.7)]

                                              = 11.05 [9000 - 8140]

                                              = 9503 U

Correct option is "C"

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