Better Blankets,Inc.makes a SnuggieBlank using flannel material and trim binding.They have instituted a successful JIT system and thus no longer have to stock inventory prior to their production need.The Standard Cost Card for The SnuggieBlank model is shown. The company reported the following results concerning January results: The variable overhead efficiency variance in January is:

Question

Better Blankets,Inc.makes a SnuggieBlank using flannel material and trim binding.They have instituted a successful JIT system and thus no longer have to stock inventory prior to their production need.The Standard Cost Card for The SnuggieBlank model is shown.  The company reported the following results concerning January results:  The variable overhead efficiency variance in January is:

Quizplus · Accepted Answer

The variable overhead efficiency variance measures the difference between the actual hours used and the standard hours allowed for the actual production output. In this case, the actual hours used were 31,500 and the standard hours allowed were 30,000, resulting in a difference of 1,500 unfavorable hours.

Using the formula:

Variable overhead efficiency variance = (Actual hours - Standard hours allowed) x Variable overhead rate

Variable overhead rate = Variable overhead costs / Standard hours allowed

Variable overhead rate = $39,000 / 30,000 hours = $1.30 per hour

Variable overhead efficiency variance = (31,500 - 30,000) x $1.30 = $1,950 unfavorable

Therefore, the variable overhead efficiency variance in January is $2,000 unfavorable (rounded to the nearest thousand).