Gina Production Company uses a standard costing system. The following information pertains to 2011. The factory overhead rate is based on an activity level of 10,000 hours. Standard cost data for 5,000 units is as follows:
What is the variable overhead efficiency variance for Gina Production Company?
A) $562.50 F
B) $3,000.00 U
C) $562.50 U
D) $1,687.50 F

Question

Gina Production Company uses a standard costing system. The following information pertains to 2011.  The factory overhead rate is based on an activity level of 10,000 hours. Standard cost data for 5,000 units is as follows:
 What is the variable overhead efficiency variance for Gina Production Company?
A) $562.50 F 
B) $3,000.00 U 
C) $562.50 U 
D) $1,687.50 F

Quizplus · Accepted Answer

Variable overhead efficiency variance = (Standard hours allowed for production - Actual hours used) x Variable overhead rate per hour

Standard hours allowed for production = 1 hour per unit x 5,000 units = 5,000 hours
Actual hours used = 4,800 hours
Variable overhead rate per hour = $11.25 per hour

Variable overhead efficiency variance = (5,000 - 4,800) x $11.25 = $562.50 U

Gina Production Company Uses a Standard Costing System