The Dodge Company makes and sells a single product and uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. The Dodge Company had the following budgeted and actual data for the year:

The budgeted direct labor-hours is used as the denominator activity for the month.
-The variable overhead efficiency variance was:
A)$6,000 U
B)$6,000 F
C)$12,000 U
D)$12,000 F

Question

The Dodge Company makes and sells a single product and uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. The Dodge Company had the following budgeted and actual data for the year:

The budgeted direct labor-hours is used as the denominator activity for the month.
-The variable overhead efficiency variance was:

The budgeted direct labor-hours is used as the denominator activity for the month.
-The variable overhead efficiency variance was:
A)$6,000 U 
B)$6,000 F 
C)$12,000 U 
D)$12,000 F

Quizplus · Accepted Answer

SH = 33,000 units F1F1F1S1F1F1F10 5 hours per unit = 165,000 hours
Variable overhead efficiency variance = (AH F1F1F1S1F1F1F10 SR)- (SH F1F1F1S1F1F1F10 SR)
= $126,000 - (165,000 hours F1F1F1S1F1F1F10 $0.80 per hour)
= $126,000 - $132,000 = $6,000 F

The Dodge Company Makes and Sells a Single Product and Uses