Melrose Manufacturing produces gourmet blackberry preserves.Melrose based its current year budget on a production level of 540,000 jars of preserves using ½ hour direct labor time for each jar (which includes hand-sorting and trimming the berries).Total budgeted variable overhead for the year was $1,242,000.During the year, Melrose used 280,000 direct labor hours to produce 550,000 jars of blackberry preserves.Actual variable overhead for the year was $1,246,000.What is Melrose's variable overhead efficiency variance?

Question

Quizplus · Accepted Answer

Variable overhead efficiency variance measures the difference between actual hours worked and standard hours allowed, multiplied by the standard variable overhead rate per hour.

Standard hours allowed = Actual output x Standard hours per unit

Standard hours per unit = 0.5 hours per jar

Standard hours allowed = 550,000 jars x 0.5 hours per jar = 275,000 hours

Standard variable overhead rate per hour = Total budgeted variable overhead / Total budgeted direct labor hours = $1,242,000 / (540,000 jars x 0.5 hours per jar) = $4.60 per hour

Actual hours worked = 280,000 hours

Variable overhead efficiency variance = (Standard hours allowed - Actual hours worked) x Standard variable overhead rate per hour

= (275,000 hours - 280,000 hours) x $4.60 per hour

= $23,000 unfavorable

Therefore, the correct answer is D) $23,000 unfavorable.

Melrose Manufacturing Produces Gourmet Blackberry Preserves