Milar Corporation makes a product with the following standard costs:
In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
-The variable overhead efficiency variance for January is:
A) $36 U
B) $40 F
C) $36 F
D) $40 U

Question

Milar Corporation makes a product with the following standard costs:
  In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
-The variable overhead efficiency variance for January is:
A) $36 U 
B) $40 F 
C) $36 F 
D) $40 U

Quizplus · Accepted Answer

SH = 2,000 units × 0.1 hours per unit = 200 hours
Variable overhead efficiency variance = (AH - SH) × SR
= (210 hours − 200 hours) × $4.00 per hour
= (10 hours) × $4.00 per hour
= $40 U

Milar Corporation Makes a Product with the Following Standard Costs