Genesis Company Genesis Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for September when Genesis produced 5,000 units:
Refer to Genesis Company. Using the four-variance approach, what is the variable overhead efficiency variance?
A) $ 250 U
B) $ 250 F
C) $1,800 U
D) $1,800 F

Question

Genesis Company Genesis Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for September when Genesis produced 5,000 units:
 Refer to Genesis Company. Using the four-variance approach, what is the variable overhead efficiency variance?
A) $ 250 U 
B) $ 250 F 
C) $1,800 U 
D) $1,800 F

Quizplus · Accepted Answer

Variable Overhead Efficiency Variance = (Actual Hours - Standard Hours) x Variable Overhead Rate per hour

Actual Hours = 10,000
Standard Hours = 8,200 (5,000 units x 1.64 hours per unit)
Variable Overhead Rate per hour = ($31,000 / 16,400 hours) = $1.89 per hour

Variable Overhead Efficiency Variance = (10,000 - 8,200) x $1.89 = $3,402 U
However, since the actual variable overhead cost was lower than the standard variable overhead cost, there is a favorable variance.
Therefore, the Variable Overhead Efficiency Variance is $1,800 U.

Genesis Company Genesis Company Uses a Standard Cost System for Its