XDT Limited uses a standard costing system for all its services. XDT Limited services photocopiers. The standard direct labour time to service one photocopier is 2½ hours. Variable overhead is incurred at the rate of £5.00 per labour hour. The company budgets 750 photocopier services per month with budgeted monthly labour hours of 1,875. In September, XDT Limited serviced 800 photocopiers and paid their service engineers for a total of 1,950 labour hours. Actual variable overhead expenditure for the month was £9,550. What is the variable overhead efficiency variance for September?
A) £200 Favourable
B) £250 Favourable
C) £375 Unfavourable
D) £450 Favourable

Question

Quizplus · Accepted Answer

The variable overhead efficiency variance is calculated as (Standard hours for actual output - Actual hours) x Standard variable overhead rate. Standard hours for 800 photocopiers = 800 x 2.5 = 2000 hours. Efficiency variance = (2000 - 1950) x £5 = £250 Favourable.

XDT Limited Uses a Standard Costing System for All Its