Sampson Apparel Inc.
Sampson Apparel Inc. incurred actual variable overhead expenses of $62 000 in the current year for the production of 10 000 units. Variable overhead was applied at a rate of $2.00 per direct labour hour and 3 direct labour hours were budgeted for each unit. The company used 29 000 direct labour hours for production.
-What was Sampson's variable overhead efficiency variance?
A) $4000 U
B) $4000 F
C) $2000 U
D) $2000 F

Question

Quizplus · Accepted Answer

The variable overhead efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. Standard hours for actual production are 10,000 units x 3 hours/unit = 30,000 hours. The standard rate is $2.00 per direct labour hour. Thus, the variance is (29,000 - 30,000) x $2.00 = -$2,000, indicating a $2000 favorable (F) variance because actual hours were less than standard hours.

Sampson Apparel Inc. Sampson Apparel Inc. Incurred Actual Variable Overhead Expenses of $62