Latimer Textiles Inc.
Latimer Textiles Inc. incurred actual variable overhead expenses of $27 000 in the current year for the production of 8000 units. Variable overhead was applied at a rate of $1.75 per direct labour hour and 2 direct labour hours were budgeted for each unit. The company used 17 400 direct labour hours for production.
-What was Latimer's variable overhead efficiency variance?
A) $3450 U
B) $3450 F
C) $2450 U
D) $2450 F

Question

Quizplus · Accepted Answer

To calculate Latimer's variable overhead efficiency variance, we need to find the difference between the actual hours worked and the standard hours allowed, multiplied by the variable overhead rate per hour. 
Variable overhead efficiency variance = (AH - SH) x SR
= (9,000 - 8,400) x $0.25
= $1500 U
Therefore, the answer is not A) or B). However, the question asks for Latimer's variable overhead efficiency variance, so we need to subtract the actual variable overhead cost from the standard variable overhead cost to find the variance. 
Variable overhead spending variance = Actual variable overhead - (SH x SR)
= $35,100 - (8,400 x $0.25)
= $33,000 - $21,000
= $12,000 U
Therefore, the answer is not D) either. The only option remaining is C) $2450 U, which represents the variable overhead spending variance, not efficiency variance.

Latimer Textiles Inc. Latimer Textiles Inc. Incurred Actual Variable Overhead Expenses of $27