(Appendix 10A) Arca Incorporated makes a single product--a critical part used in commercial airline seats. 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) $258 U
B) $88 F
C) $88 U
D) $258 F

Question

(Appendix 10A) Arca Incorporated makes a single product--a critical part used in commercial airline seats. 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) $258 U 
B) $88 F 
C) $88 U 
D) $258 F

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate (SR) = $38,700/30,000 machine-hours
= $1.29 per machine-hour
Variable overhead efficiency variance = (AH - SH) × SR
= (22,300 machine-hours - 22,500 machine-hours) × $1.29 per machine-hour
= (-200 machine-hours) × $1.29 per machine-hour
= $258 F

(Appendix 10A) Arca Incorporated Makes a Single Product--A Critical Part