Majer Corporation makes a product with the following standard costs: The company

Question

Majer Corporation makes a product with the following standard costs:

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

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 February is:

Standard Quantity
or Hours Standard Price or
Rate Standard Cost Per Unit Direct materials 6.3 ounces $ 2.00 per ounce $ 12.60 Direct labor 0.5 hours $ 10.00 per hour $ 5.00 Variable overhead 0.5 hours $ 4.00 per hour $ 2.00

Explanation / Answer

Answer:-

Variable overhead efficiency variance=(Standard hours–Actual working hours)*Standard Rate

                                       = ($2500 hours - $1900 hours)*$4.00 per hour   

                                       = $2400 Favourable

Where:-

Standard hours:- Standard hour per unit * Actual output

                         =.50 hours per unit*5000 units= 2500 hours

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