Gina Production Company uses a standard costing system.The following information pertains to 2011. The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows:
What is the variable overhead efficiency variance for Gina Production Company?
A) $562.50 (
B) $3,000.00 (
C) $562.50 (
D) $1,687.50 (

Question

Gina Production Company uses a standard costing system.The following information pertains to 2011.  The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows:
 What is the variable overhead efficiency variance for Gina Production Company?
A) $562.50 (
B) $3,000.00 (
C) $562.50 (
D) $1,687.50 (

Quizplus · Accepted Answer

The variable overhead rate is calculated as $6,000 / 10,000 units = $0.60 per unit.

Based on the standard cost data, the standard hours allowed for 5,000 units is 12,500 hours (2.5 hours per unit).

The actual hours worked were 12,000 hours. Therefore, the variable overhead efficiency variance is:

(Standard hours allowed - actual hours worked) x variable overhead rate
= (12,500 - 12,000) x $0.60
= $300 (U)

Therefore, option C is correct.

Gina Production Company Uses a Standard Costing System