Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}
\text { Direct materials: } & 10 \text { pounds } \times \$ 3 \text { per pound } \
\text { Direct labor: } & 2.5 \text { hours } \times \$ 8 \text { per hour } \
\text { Variable manufacturing overhead: } & 2.5 \text { hours } \times \$ 2 \text { per hour }
\end{array}$
$\text { The following activity occurred during the month of June: }$
$\begin{array}{ll}
\text { Materials purchased: } & 125,000 \text { pounds at } \$ 2.60 \text { per pound } \
\text { Materials used: } & 110,000 \text { pounds } \
\text { Units produced: } & 10,000 \text { units } \
\text { Direct labor: } & 24,000 \text { hours at } \$ 7.50 \text { per hour } \
\text { Actual variable manufacturing overhead: } & \$ 51,000
\end{array}$ The company records materials price variances at the time of purchase.
The variable manufacturing overhead efficiency variance is
A)$1,000 favorable.
B)$2,000 favorable.
C)$1,000 unfavorable.
D)$3,000 unfavorable.

Question

Quizplus · Accepted Answer

The standard hours for actual production are 10,000 units x 2.5 hours = 25,000 hours. The actual hours worked were 24,000 hours. The efficiency variance is (25,000 - 24,000) x $2 = $2,000 favorable.

Biscuit Company Has Developed the Following Standards for One of Its