Allbrand 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:
At the end of the year, actual data were as follows:
At the end of the year, the efficiency variance for variable overhead costs was unfavorable.

Question

Allbrand 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:
  At the end of the year, actual data were as follows:
  At the end of the year, the efficiency variance for variable overhead costs was unfavorable.

Quizplus · Accepted Answer

Since the actual direct labor hours per unit of product must have been more than the standard hours (which were 0.1 per unit), the efficiency variance for variable overhead costs would be unfavorable.

Allbrand Company Uses Standard Costs for Their Manufacturing Division