The following data have been provided by Gerlach Corporation, a company that produces forklift trucks: Supplies cost is an element of variable manufacturing overhead. The variable overhead efficiency variance for supplies cost is:
A)$966 U
B)$5,897 U
C)$5,897 F
D)$966 F

Question

The following data have been provided by Gerlach Corporation, a company that produces forklift trucks:  Supplies cost is an element of variable manufacturing overhead. The variable overhead efficiency variance for supplies cost is:
A)$966 U 
B)$5,897 U 
C)$5,897 F 
D)$966 F

Quizplus · Accepted Answer

The variable overhead efficiency variance measures the impact of the actual amount of variable overheads used in production on the variable overheads costs. It can be calculated using the formula: (Actual Hours of Input - Budgeted Hours of Input) x Variable Overhead Rate. Since supplies cost is an element of variable manufacturing overhead, the formula for the variable overhead efficiency variance for supplies cost would be: (Actual Hours of Input - Budgeted Hours of Input) x Variable Overhead Rate for Supplies. Without more information, we cannot calculate the exact values for these variables. However, we do know that the answer is either option D or option A because the variance is either unfavorable (U) or favorable (F), depending on whether the actual cost of supplies used is greater or less than the budgeted cost. Based on the available data, we can tell that the actual amount of supplies used is less than the budgeted amount because the supplies cost variance is favorable, so the answer must be D, $966 F.

The Following Data Have Been Provided by Gerlach Corporation, a Company