Elite Brands Company uses standard costs for their manufacturing division. Standards specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static budget for variable overhead costs included the following data: Calculate the variable overhead efficiency variance.

Question

Elite Brands Company uses standard costs for their manufacturing division. Standards specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static budget for variable overhead costs included the following data:  Calculate the variable overhead efficiency variance.

Quizplus · Accepted Answer

Variable overhead efficiency variance can be calculated as follows:

Variable Overhead Efficiency Variance = (Actual Hours – Standard Hours) x Standard Variable Overhead Rate

In this problem, the standard direct labor hours per unit of product is 0.1. However, the problem does not provide data on actual labor hours. Therefore, we cannot calculate the variable overhead efficiency variance.

However, we can eliminate choices A and C, which suggest that there is a variance of either $1,800 or $4,200. These choices are both incorrect since we cannot calculate the variance.

Therefore, the only possible choice is B, which suggests that there is an unfavorable variance of $1,800. However, we cannot confirm this without additional data.

Elite Brands Company Uses Standard Costs for Their Manufacturing Division