Thilges Incorporated makes a single product-a cooling coil used in commercial refrigerators. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below: The variable overhead efficiency variance is:
A) $1,740 U
B) $1,398 F
C) $1,740 F
D) $1,398 U

Question

Thilges Incorporated makes a single product-a cooling coil used in commercial refrigerators. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below:  The variable overhead efficiency variance is:
A) $1,740 U 
B) $1,398 F 
C) $1,740 F 
D) $1,398 U

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate (SR) = $29,125/12,500 machine-hours
= $2.33 per machine-hour
Variable overhead efficiency variance = (AH − SH) × SR
= (10,400 machine-hours − 11,000 machine-hours) × $2.33 per machine-hour
= (−600 machine-hours) × $2.33 per machine-hour
= $1,398 F

Thilges Incorporated Makes a Single Product-A Cooling Coil Used in Commercial