Use the following information to answer the following Questions
Sigmo Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine hours were anticipated. Other data for the period were:
Actual units produced: 10,600
Actual machine hours worked: 51,800
Actual variable overhead incurred: $475,000
Actual fixed overhead incurred: $790,100
Standard variable overhead rate per machine hour: $8.50
Standard production time per unit: 5 hours

-Sigmo's variable-overhead efficiency variance is:
A) $10,200U.
B) $10,200F.
C) $15,300U.
D) $15,300F.
E) None of the answers is correct.

Question

Use the following information to answer the following Questions
Sigmo Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine hours were anticipated. Other data for the period were: 
	Actual units produced: 10,600
	Actual machine hours worked: 51,800
	Actual variable overhead incurred: $475,000
	Actual fixed overhead incurred: $790,100
	Standard variable overhead rate per machine hour: $8.50
	Standard production time per unit: 5 hours

-Sigmo's variable-overhead efficiency variance is:
A) $10,200U.
B) $10,200F.
C) $15,300U.
D) $15,300F.
E) None of the answers is correct.

Quizplus · Accepted Answer

The variable-overhead efficiency variance is calculated as the difference between the actual hours worked and the standard hours allowed for the actual output, multiplied by the standard variable overhead rate per machine hour. The standard hours allowed for the actual output (10,600 units * 5 hours per unit) = 53,000 hours. The actual hours worked were 51,800 hours. Therefore, the company worked 1,200 hours less than the standard (53,000 - 51,800 = 1,200 hours). Multiplying this difference by the standard variable overhead rate per machine hour ($8.50) gives a variance of $10,200 ($8.50 * 1,200 hours) in favor of the company, hence a favorable variance.

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