Gina Production Company uses a standard costing system. The following information pertains to 2011. The factory overhead rate is based on an activity level of 10,000 hours. Standard cost data for 5,000 units is as follows:
What is the variable overhead efficiency variance for Gina Production Company?
A) $562.50 F
B) $3,000.00 U
C) $562.50 U
D) $1,687.50 F

Question

Gina Production Company uses a standard costing system. The following information pertains to 2011.  The factory overhead rate is based on an activity level of 10,000 hours. Standard cost data for 5,000 units is as follows:
 What is the variable overhead efficiency variance for Gina Production Company?
A) $562.50 F 
B) $3,000.00 U 
C) $562.50 U 
D) $1,687.50 F

Quizplus · Accepted Answer

Variable Overhead Efficiency Variance = (Actual Hours – Standard Hours) × Standard Rate
= (9,500 – 10,000) × $0.075
= $562.50 U (Unfavorable because actual hours are less than the standard hours)

Gina Production Company Uses a Standard Costing System