The Phelps Company applies overhead costs to products on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: The budgeted direct labor-hours is used as the denominator activity for the month.
-The variable overhead efficiency variance for March is:
A)$8,000 favorable
B)$4,000 favorable
C)$8,000 unfavorable
D)$4,000 unfavorable

Question

The Phelps Company applies overhead costs to products on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March:  The budgeted direct labor-hours is used as the denominator activity for the month.
-The variable overhead efficiency variance for March is:
A)$8,000 favorable 
B)$4,000 favorable 
C)$8,000 unfavorable 
D)$4,000 unfavorable

Quizplus · Accepted Answer

SH = 22,000 units F1F1F1S1F1F1F10 5 hours per unit = 110,000 hours
Variable overhead efficiency variance = (AH F1F1F1S1F1F1F10 SR)- (SH F1F1F1S1F1F1F10 SR)
= $84,000 - (110,000 hours F1F1F1S1F1F1F10 $0.80 per hour)
= $84,000 - $88,000 = $4,000 F

The Phelps Company Applies Overhead Costs to Products on the Basis