Bulluck Corporation makes a product with the following standard costs: The compa

Question

Bulluck Corporation makes a product with the following standard costs:

The company reported the following results concerning this product in July.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead efficiency variance for July is:

Standard Quantity or Hours Standard Price or Rate Direct materials 4.50 grams $ 2.00 per gram Direct labor 0.50 hours $ 21.00 per hour Variable overhead 0.50 hours $ 3.00 per hour

Explanation / Answer

Variable overhead efficiency variance = (Standard hours - Actual hours) x Standard rate
= (4,000 x 0.50 - 1,750) x $3
= $750 Favorable   

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