Gina Production Company uses a standard costing system.The following information pertains to 2011. The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows:
What is the variable overhead efficiency variance for Gina Production Company?
A)$562.50 F
B)$3,000.00 U
C)$562.50 U
D)$1,687.50 F

Question

Gina Production Company uses a standard costing system.The following information pertains to 2011.  The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows:
 What is the variable overhead efficiency variance for Gina Production Company?
A)$562.50 F 
B)$3,000.00 U 
C)$562.50 U 
D)$1,687.50 F

Quizplus · Accepted Answer

Variable overhead efficiency variance = (Standard hours allowed for actual output - Actual hours used) x Standard variable overhead rate per hour

Standard hours allowed for actual output = (5,000 units x 1.2 standard hours per unit) = 6,000 standard hours
Actual hours used = 6,500 hours
Standard variable overhead rate per hour = $5 per hour

Variable overhead efficiency variance = (6,000 - 6,500) x $5 = $562.50 unfavorable (U)

Gina Production Company Uses a Standard Costing System