Stopyra 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 labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: The variable overhead efficiency variance is:
A) $1,645 F
B) $2,121 U
C) $2,121 F
D) $1,645 U

Question

Stopyra 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 labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:  The variable overhead efficiency variance is:
A) $1,645 F 
B) $2,121 U 
C) $2,121 F 
D) $1,645 U

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate (SR) = $28,200/12,000 labor-hours
= $2.35 per labor-hour
Variable overhead efficiency variance = (AH − SH) × SR
= (8,900 labor-hours − 9,600 labor-hours) × $2.35 per labor-hour
= (−700 labor-hours) × $2.35 per labor-hour
= $1,645 F

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