Doogan Corporation makes a product with the following standard costs: The company produced 5,200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 per hour.
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 January is:
A) $1,496 F
B) $1,496 U
C) $1,540 U
D) $1,540 F

Question

Doogan Corporation makes a product with the following standard costs:  The company produced 5,200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 per hour.
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 January is:
A) $1,496 F 
B) $1,496 U 
C) $1,540 U 
D) $1,540 F

Quizplus · Accepted Answer

SH = 5,200 units × 0.5 hours per unit = 2,600 hours
Variable overhead efficiency variance = (AH × SR) − (SH × SR)
= (2,380 hours − 2,600 hours) × $7.00 per hour
= (-220 hours) × $7.00 per hour
= $1,540 F

Doogan Corporation Makes a Product with the Following Standard Costs