Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. Direct materials: 10 pounds × $3 per pound
Direct labor: 2.5 hours × $8 per hour
Variable manufacturing overhead: 2.5 hours × $2 per hour
The following activity occurred during the month of June:
Materials purchased: 125,000 pounds at $2.60 per pound
Materials used: 110,000 pounds
Units produced: 10,000 units
Direct labor: 24,000 hours at $7.50 per hour
Actual variable manufacturing overhead: $51,000
The company records materials price variances at the time of purchase.
The variable manufacturing overhead efficiency variance is
A) $1,000 favorable.
B) $2,000 favorable.
C) $1,000 unfavorable.
D) $3,000 unfavorable.

Question

Quizplus · Accepted Answer

The variable manufacturing overhead efficiency variance is calculated as (Actual hours - Standard hours) × Standard rate. Standard hours for 10,000 units = 10,000 units × 2.5 hours/unit = 25,000 hours. Actual hours = 24,000 hours. Variance = (24,000 - 25,000) × $2 = -1,000 × $2 = $2,000 favorable.

Biscuit Company Has Developed the Following Standards for One of Its