Gerhan Company's flexible budget for the units manufactured in May shows $15,640 of total factory overhead; this output level represents 70% of available capacity. During May, the company applied overhead to production at the rate of $3.00 per direct labor hour (DLH), based on a denominator volume level of 6,120 DLHs, which represents 90% of available capacity. The company used 5,000 DLHs and incurred $16,500 of total factory overhead cost during May, including $6,800 for fixed factory overhead.

What is the factory overhead efficiency variance (to the nearest whole dollar) for May under the assumption that Gerhan uses a four-variance breakdown (decomposition) of the total overhead variance?
A) $180 unfavorable.
B) $380 favorable.
C) $380 unfavorable.
D) $480 unfavorable.
E) $480 favorable.

Question

Gerhan Company's flexible budget for the units manufactured in May shows $15,640 of total factory overhead; this output level represents 70% of available capacity. During May, the company applied overhead to production at the rate of $3.00 per direct labor hour (DLH) , based on a denominator volume level of 6,120 DLHs, which represents 90% of available capacity. The company used 5,000 DLHs and incurred $16,500 of total factory overhead cost during May, including $6,800 for fixed factory overhead.

What is the factory overhead efficiency variance (to the nearest whole dollar) for May under the assumption that Gerhan uses a four-variance breakdown (decomposition) of the total overhead variance?

What is the factory overhead efficiency variance (to the nearest whole dollar) for May under the assumption that Gerhan uses a four-variance breakdown (decomposition) of the total overhead variance?
A) $180 unfavorable.
B) $380 favorable.
C) $380 unfavorable.
D) $480 unfavorable.
E) $480 favorable.

Quizplus · Accepted Answer

The Answer of Gerhan Company's flexible budget for the units manufactured in May shows $15,640 of total factory overhead; this output level represents 70% of available capacity. During May, the company applied overhead to production at the rate of $3.00 per direct labor hour (DLH), based on a denominator volume level of 6,120 DLHs, which represents 90% of available capacity. The company used 5,000 DLHs and incurred $16,500 of total factory overhead cost during May, including $6,800 for fixed factory overhead.

What is the factory overhead efficiency variance (to the nearest whole dollar) for May under the assumption that Gerhan uses a four-variance breakdown (decomposition) of the total overhead variance?
A) $180 unfavorable.
B) $380 favorable.
C) $380 unfavorable.
D) $480 unfavorable.
E) $480 favorable.

Gerhan Company's Flexible Budget for the Units Manufactured in May