Silver Manufacturing Company has a standard variable overhead rate of $4 per machine hour, with each completed unit expected to take three machine hours to produce. A review of Silver's accounting records found the following: Actual variable overhead: $210,000
Variable-overhead efficiency variance: $18,000U
Variable-overhead spending variance: $30,000F
How many units did Silver actually produce during the period?

Question

Quizplus · Accepted Answer

Let X be the number of units produced.

Variable-overhead spending variance = Actual variable overhead - (Standard variable overhead rate * Actual machine hours)
-30,000 = 210,000 - (4 * Actual machine hours)
Actual machine hours = 60,000 / 4
Actual machine hours = 15,000

Variable-overhead efficiency variance = (Standard variable overhead rate - Actual variable overhead rate) * Actual machine hours
-18,000 = (4 - Actual variable overhead rate) * 15,000
Actual variable overhead rate = 5.20

Standard machine hours = X * 3
Actual machine hours = X * 3
Total variable overhead = Actual variable overhead rate * Actual machine hours

210,000 = 5.20 * 3 * X
X = 18,500

Therefore, Silver actually produced 18,500 units during the period.

Silver Manufacturing Company Has a Standard Variable Overhead Rate of $4