(Appendix 11A)Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours.For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20, 000 machine-hours: During June, 17, 000 machine-hours were used to complete 13, 000 units of product, and the following actual total overhead costs were incurred: At standard, each unit of finished product requires 1.4 hours of machine time. The variable overhead efficiency variance for utilities cost for June was:
A)$400 F
B)$400 U
C)$600 F
D)$600 U

Question

(Appendix 11A)Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours.For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20, 000 machine-hours:  During June, 17, 000 machine-hours were used to complete 13, 000 units of product, and the following actual total overhead costs were incurred:  At standard, each unit of finished product requires 1.4 hours of machine time. The variable overhead efficiency variance for utilities cost for June was:
A)$400 F 
B)$400 U 
C)$600 F 
D)$600 U

Quizplus · Accepted Answer

SH = 13, 000 units × 1.4 machine-hours per unit = 18, 200 machine-hours
SR = ($10, 000)÷ 20, 000 machine-hours = $0.50 per machine-hour
Variable overhead efficiency variance = (AH - SH)× SR
= (17, 000 machine-hours - 18, 200 machine-hours)× $0.50 per machine-hour
= (-1, 200 machine-hours)× $0.50 per machine-hour
= $600 F

(Appendix 11A)Pohl Corporation Uses a Standard Cost System in Which