Griffen Corporation uses a standard costing system.Information for the month of May is as follows: The factory overhead rate is based on a normal volume of 12,000 direct labor hours.Standard cost data at 12,000 direct labor hours were as follows:
What is the variable overhead efficiency variance for Griffen?
A)$2,000 U
B)$8,000 U
C)$4,000 U
D)$20,000 U

Question

Griffen Corporation uses a standard costing system.Information for the month of May is as follows:  The factory overhead rate is based on a normal volume of 12,000 direct labor hours.Standard cost data at 12,000 direct labor hours were as follows:
 What is the variable overhead efficiency variance for Griffen?
A)$2,000 U 
B)$8,000 U 
C)$4,000 U 
D)$20,000 U

Quizplus · Accepted Answer

To calculate the variable overhead efficiency variance, we need to compare the standard hours allowed for production with the actual hours used.

Standard hours allowed = Standard direct labor hours at normal capacity x Standard variable overhead rate per hour

Standard hours allowed = 12,000 x $1.50 = $18,000

Actual hours used = 10,000

Variable overhead efficiency variance = (Standard hours allowed – actual hours used) x Standard variable overhead rate per hour

Variable overhead efficiency variance = ($18,000 – $15,000) x $0.50

Variable overhead efficiency variance = $1,500 x 1.5

Variable overhead efficiency variance = $2,250 U

Therefore, the correct answer is B, $8,000 U is not correct as it is an incorrect calculation.

Griffen Corporation Uses a Standard Costing System