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Anacortes, Inc. uses a standard cost system. At the beginning of the year, it budgeted $50,000 for fixed overhead. The estimated variable overhead allocation rate was $3.30 per machine hour, and machine hours is the cost allocation base for both variable and fixed overhead. The static budget was based on 16,000 units of production and sales, and each unit was expected to use 2.5 machine hours. Actual total overhead was $170,000, and Anacortes produced and sold 15,000 units during the year. Actual machine hours for the year were 36,000.
-The variable overhead efficiency variance was
A) $4,950 favorable
B) $3,750 favorable
C) $1,200 unfavorable
D) $3,125 unfavorable

Question

Quizplus · Accepted Answer

The variable overhead efficiency variance is calculated as the difference between the actual variable overhead incurred and the budgeted variable overhead based on actual machine hours.Actual variable overhead = Actual machine hours x Variable overhead rate= 36,000 x $3.30= $118,800Budgeted variable overhead = Actual machine hours x Budgeted variable overhead rate= 36,000 x $3.30= $118,800Variable overhead efficiency variance = Actual variable overhead - Budgeted variable overhead= $118,800 - $118,800= $0Therefore, the variable overhead efficiency variance is $0, which is favorable.

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