Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead efficiency variance. $\begin{array}{lll}
\text { Direct labor stendard (2 hrs. @ } \$ 12.75 / \mathrm{hr} \text {.) } & \$ 25.50 &\text {per finished unit}\
\text { Actual direct labor hours } & 81,500&\text { hrs}\
\text { Budgeted units } & 42,000&\text {units}\
\text {Actual finished units produced}&40,000&\text {units}\
\text {Standad variable OH rate (2 hrs. @ \$14.30/hr)}&\$28.60&\text {per finished unit}\
\text {Standard fixed OH rate $ (\$ 336,000 / 42,000 $ units)}&\$8.00 &\text {per unit}\
\text {Actual cost of variable overhead costs incurred}&\$1,140,000\
\text {Actual cost of fixed overhead costs incurred} &\$ 338,000
\end{array}$

A) $21,450 unfavorable.
B) $21,450 favorable.
C) $4,000 favorable.
D) $14,300 unfavorable.
E) $4,000 unfavorable.

Question

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead efficiency variance. $\begin{array}{lll}
\text { Direct labor stendard (2 hrs. @ } \$ 12.75 / \mathrm{hr} \text {.) } & \$ 25.50 &\text {per finished unit}\
\text { Actual direct labor hours } & 81,500&\text { hrs}\
\text { Budgeted units } & 42,000&\text {units}\
\text {Actual finished units produced}&40,000&\text {units}\
\text {Standad variable OH rate (2 hrs. @ \$14.30/hr)}&\$28.60&\text {per finished unit}\
\text {Standard fixed OH rate $ (\$ 336,000 / 42,000 $ units)}&\$8.00 &\text {per unit}\
\text {Actual cost of variable overhead costs incurred}&\$1,140,000\
\text {Actual cost of fixed overhead costs incurred} &\$ 338,000 
\end{array}$

A) $21,450 unfavorable.
B) $21,450 favorable.
C) $4,000 favorable.
D) $14,300 unfavorable.
E) $4,000 unfavorable.

Quizplus · Accepted Answer

Variable overhead efficiency variance = (Standard hours allowed - Actual hours worked) x Variable overhead rate per hour

Standard hours allowed = 11,500 x 2 = 23,000 
Actual hours worked = 21,500 
Variable overhead rate per hour = $1.50

Variable overhead efficiency variance = (23,000 - 21,500) x $1.50 = $21,450 unfavorable.

Fletcher Company Collected the Following Data Regarding Production of One