Figure 5
Ebola Company has developed the following standards for one of its products:
The following activities occurred during the month of October:
The company records materials price variances at the time of purchase.

-Refer to Figure 5. Ebola's variable overhead efficiency variance would be
A) £4,000 favorable
B) £4,000 unfavorable
C) £8,000 favorable
D) £12,000 unfavorable

Question

Figure 5
Ebola Company has developed the following standards for one of its products:
The following activities occurred during the month of October:
  The company records materials price variances at the time of purchase.
 
-Refer to Figure 5. Ebola's variable overhead efficiency variance would be
A) £4,000 favorable 
B) £4,000 unfavorable 
C) £8,000 favorable 
D) £12,000 unfavorable

Quizplus · Accepted Answer

The formula for variable overhead efficiency variance is (Standard hours - Actual hours) x Standard hourly rate. 
From the figure, we can see that the actual hours worked are 20,000 and the standard hours allowed are 16,000. Therefore, the variance is (16,000 - 20,000) x £1 = £ -4,000 (unfavorable).

Figure 5 Ebola Company Has Developed the Following Standards for One of One