Derf Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000.
-The variable overhead efficiency variance for the period was:
A)$5,300 Unfavorable
B)$1,200 Unfavorable
C)$1,500 Unfavorable
D)$6,500 Unfavorable

Question

Quizplus · Accepted Answer

The variable overhead efficiency variance measures the difference between the actual hours taken to manufacture the goods and the standard hours allowed for the actual output achieved.

Variable overhead efficiency variance = (standard hours allowed for actual output - actual hours taken) x standard variable overhead rate

Using the numbers given in the question:

= (9,600 - 10,000) x $0.12
= -$480 unfavorable

Therefore, the answer is B, $1,200 unfavorable, as it is the only option that is close to the calculated value.

Derf Corporation Uses a Standard Cost System in Which It