Burkett Company uses a standard cost system. Indirect costs were budgeted at $200,000 plus $15 per direct labour hour. The overhead rate is based on 10,000 hours. Actual results were: $$\begin{array} { l r }
\text { Standard direct labour hours } & 9,000 \
\text { Actual direct labour hours } & 10,000 \
\text { Fixed overhead } & \$ 190,000 \
\text { Variable overhead } & \$ 185,000
\end{array}$$ The variable overhead efficiency variance was:
A) $10,000 F
B) $50,000 U
C) $35,000 U
D) $15,000 U

Question

Burkett Company uses a standard cost system. Indirect costs were budgeted at $200,000 plus $15 per direct labour hour. The overhead rate is based on 10,000 hours. Actual results were: $$\begin{array} { l r } 
\text { Standard direct labour hours } & 9,000 \
\text { Actual direct labour hours } & 10,000 \
\text { Fixed overhead } & \$ 190,000 \
\text { Variable overhead } & \$ 185,000
\end{array}$$ The variable overhead efficiency variance was:
A) $10,000 F
B) $50,000 U
C) $35,000 U
D) $15,000 U

Quizplus · Accepted Answer

The variable overhead efficiency variance is calculated as (Standard hours - Actual hours) * Standard variable overhead rate. The standard variable overhead rate is $15 per direct labor hour. Therefore, the variance is (9,000 - 10,000) * $15 = -$15,000, which is unfavorable (U) because actual hours exceeded standard hours.

Burkett Company Uses a Standard Cost System The Variable Overhead Efficiency Variance Was: A) $10,000 F B)

Burkett Company Uses a Standard Cost System The Variable Overhead Efficiency Variance Was:
A) $10,000 F
B)