The following standards for variable manufacturing 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)$1,680 F
B)$1,190 U
C)$1,155 U
D)$1,190 F

Question

The following standards for variable manufacturing 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)$1,680 F 
B)$1,190 U 
C)$1,155 U 
D)$1,190 F

Quizplus · Accepted Answer

The variable overhead efficiency variance is calculated as (AH - SR) x AR, where AH is the actual hours worked, SR is the standard hours allowed for the actual output, and AR is the standard hourly rate. 
In this case, the actual hours worked were 7,800, while the standard hours allowed were 8,400 (600 units at 14 hours per unit). Therefore, the variance is (7,800 - 8,400) x $0.15 = -$90 unfavorable. 
Since the actual variable overhead cost was $7,770, the variable overhead spending variance was $90 unfavorable ($7,860 - $7,770). 
Thus, the total variable overhead variance is the sum of the spending and efficiency variances, which is (-$90) + (-$1,065) = -$1,155 unfavorable. 
Therefore, the correct answer is C) $1,155 U.

The Following Standards for Variable Manufacturing Overhead Have Been Established