Budgeted variable overhead for the year is $120,000. Expected activity is 20,000 standard direct labor hours. The actual hours worked were 18,000 and the standard hours allowed for actual production were 19,500. The variable overhead efficiency variance is
A) $0.
B) $12,000 F.
C) $3,000 F.
D) $9,000 F.
E) None of these.

Question

Quizplus · Accepted Answer

Variable overhead efficiency variance measures the difference between the actual hours worked and the standard hours allowed for the actual production multiplied by standard variable overhead rate.

Standard Variable Overhead Rate = Budgeted variable overhead / Expected activity
Standard Variable Overhead Rate = $120,000 / 20,000 hours = $6 per hour

Variable Overhead Efficiency Variance = Standard Variable Overhead Rate x (Standard Hours Allowed – Actual Hours Worked)
Variable Overhead Efficiency Variance = $6 x (19,500 – 18,000)
Variable Overhead Efficiency Variance = $6 x 1,500 = $9,000 F

Therefore, the correct answer is D, $9,000 F.

Budgeted Variable Overhead for the Year Is $120,000