Valera Corporation makes a product with the following standards for labor and variable overhead:
The company budgeted for production of 5,300 units in July, but actual production was 5,400 units. The company used 2,130 direct labor-hours to produce this output. The actual variable overhead rate was $6.10 per hour. The company applies variable overhead on the basis of direct labor-hours.
-The variable overhead efficiency variance for July is:
A) $183 F
B) $180 U
C) $180 F
D) $183 U

Question

Valera Corporation makes a product with the following standards for labor and variable overhead:
  The company budgeted for production of 5,300 units in July, but actual production was 5,400 units. The company used 2,130 direct labor-hours to produce this output. The actual variable overhead rate was $6.10 per hour. The company applies variable overhead on the basis of direct labor-hours.
-The variable overhead efficiency variance for July is:
A) $183 F 
B) $180 U 
C) $180 F 
D) $183 U

Quizplus · Accepted Answer

SH = 5,400 units × 0.4 hours per unit = 2,160 hours
Variable overhead efficiency variance = (AH - SH) × SR
= (2,130 hours − 2,160 hours) × $6.00 per hour
= (−30 hours) × $6.00 per hour
= $180 Fs

Valera Corporation Makes a Product with the Following Standards for Labor