The following standards for variable overhead have been established for a company that makes only one product: The following data pertain to operations for the last month:
-What is the variable overhead efficiency variance for the month?
A) $2,553 U
B) $6,747 U
C) $6,747 F
D) $6,864 U

Question

The following standards for variable overhead have been established for a company that makes only one product:  The following data pertain to operations for the last month: 
-What is the variable overhead efficiency variance for the month?
A) $2,553 U 
B) $6,747 U 
C) $6,747 F 
D) $6,864 U

Quizplus · Accepted Answer

Variable overhead efficiency variance measures the effect of using more or less hours of a variable overhead activity than planned. The formula is as follows: (Actual hours - Standard hours allowed for production) x Standard variable overhead rate per hour. 
Using the given information: 
(10,900 actual hours - 10,000 standard hours) x $0.624 standard variable overhead rate per hour = $564 x 12 = $6,768 unfavorable 
However, the question asks for the variance in terms of efficiency. Since the actual hours were more than planned, the variance is unfavorable. So, the answer is $6,768 unfavorable or $6,864 unfavorable rounded to the nearest dollar. Therefore, the best choice is D.

The Following Standards for Variable Overhead Have Been Established for a Company