Hexene, Inc.produces a specialized machine part used in forklifts.For last year's operations, the following data were gathered:
Hexene employs a standard costing system.During the year, a variable overhead rate of $6.00 was used.The labor standard requires 0.75 hours per unit produced.The variable overhead spending and efficiency variances are:
A) $45,000 U and $6,500 U.
B) $52,000 F and $12,000 U.
C) $9,600 U and $45,000 F.
D) $16,000 F and $8,400 F.
E) None of these

Question

Hexene, Inc.produces a specialized machine part used in forklifts.For last year's operations, the following data were gathered:  
 Hexene employs a standard costing system.During the year, a variable overhead rate of $6.00 was used.The labor standard requires 0.75 hours per unit produced.The variable overhead spending and efficiency variances are:
A) $45,000 U and $6,500 U. 
B) $52,000 F and $12,000 U. 
C) $9,600 U and $45,000 F. 
D) $16,000 F and $8,400 F. 
E) None of these

Quizplus · Accepted Answer

Variable overhead spending variance = Actual variable overhead - (Actual direct labor hours worked × Standard variable overhead rate) = $140,000 - ($6.00 × 32,000) = $52,000 F
Variable overhead efficiency variance = (Actual hours - Standard hours) × Standard variable overhead rate
 
Variable overhead efficiency variance = [32,000 - (40,000 × 0.75)] × $6.00 = $12,000 U