The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: The standard time allowed to complete one unit of product is 3.6 machine-hours.
-The variable overhead efficiency variance for utilities cost for November was:
A)$2,760 favorable
B)$3,760 unfavorable
C)$3,760 favorable
D)$1,000 favorable

Question

The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: The standard time allowed to complete one unit of product is 3.6 machine-hours.
-The variable overhead efficiency variance for utilities cost for November was:
A)$2,760 favorable 
B)$3,760 unfavorable 
C)$3,760 favorable 
D)$1,000 favorable

Quizplus · Accepted Answer

SH = 13,200 units F1F1F1S1F1F1F10 3.6 machine-hours per unit = 47,520 machine-hours
Variable overhead efficiency variance = (AH - SH)SR
= (42,000 machine-hours - 47,520 machine-hours)$0.50 per machine-hour
= (-5,520 machine-hours)$0.50 per machine-hour = $2,760 F

The Chase Company Uses a Standard Cost System in Which