Able Control Company, which manufactures electrical switches, uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor-hours (DLHs). The standard overhead costs are shown below: *Based on 300,000 DLHs per month.

The following information is available for the month of October:

• Plans called for the production of 60,000 switches.
• 56,000 switches were actually produced.
• 275,000 direct labor-hours were worked at a total cost of $2,550,000.
• Actual variable manufacturing overhead costs were $2,340,000.
• Actual fixed manufacturing overhead costs were $3,750,000.
-The variable overhead efficiency variance for October was:
A)$40,000 Favorable
B)$60,000 Favorable
C)$160,000 Unfavorable
D)$210,000 Unfavorable

Question

Able Control Company, which manufactures electrical switches, uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor-hours (DLHs). The standard overhead costs are shown below:  *Based on 300,000 DLHs per month.

The following information is available for the month of October:

• Plans called for the production of 60,000 switches.
• 56,000 switches were actually produced.
• 275,000 direct labor-hours were worked at a total cost of $2,550,000.
• Actual variable manufacturing overhead costs were $2,340,000.
• Actual fixed manufacturing overhead costs were $3,750,000. 
-The variable overhead efficiency variance for October was:
A)$40,000 Favorable 
B)$60,000 Favorable 
C)$160,000 Unfavorable 
D)$210,000 Unfavorable

Quizplus · Accepted Answer

AH = 56,000 units F1F1F1S1F1F1F10 5 hours per unit = 280,000 hours
Variable overhead efficiency variance = (AH F1F1F1S1F1F1F10 SR)- (SH F1F1F1S1F1F1F10 SR)
= $2,200,000 - (280,000 hours F1F1F1S1F1F1F10 $8.00 per hour)
= $2,200,000 - $2,240,000 = $40,000 F

Able Control Company, Which Manufactures Electrical Switches, Uses a Standard