Pohl Corporation uses a standard cost system in which manufacturing overhead is

Question

Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred At standard, each unit of finished product requires 1.4 hours of machine time The variable overhead efficiency variance for utilities cost for June was

Explanation / Answer

Units produced 13,000

Standard machine hours per unit 1.4

Standard hours for Acutal production 18,200 (13,000 x 1.4)

Actual Machine hours 17,000

Variable overhead (Budgeted) $10,000

Machine hours Budgeted 20,000

Predetermined Variable overhead rate $0.50 ($26,000 / 20,000)

Variable overhead efficiency Variance $600 (F) [(17,000 - 18,200) x $0.50]

Hence the correct option is $600 (F)

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