Handerson Corporation makes a product with the following standard costs: The company reported the following results concerning this product in August.
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 August is:
A) $720 U
B) $720 F
C) $780 U
D) $780 F

Question

Handerson Corporation makes a product with the following standard costs:  The company reported the following results concerning this product in August.
 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 August is:
A) $720 U 
B) $720 F 
C) $780 U 
D) $780 F

Quizplus · Accepted Answer

SH = 3,200 units × 0.4 hours per unit = 1,280 hours
Variable overhead efficiency variance = (AH - SH) × SR
= (1,160 hours − 1,280 hours) × $6.00 per hour
= (−120 hours) × $6.00 per hour
= $720 F

Handerson Corporation Makes a Product with the Following Standard Costs