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:
Production volume $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 6,000 units
Estimated variable overhead costs $\quad$$\quad$$13,500
Estimated direct labor hours (DLHr) $\quad$ 600 hours
At the end of the year, actual data were as follows:
Production volume $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$4,000 units
Actual variable overhead costs $\quad$$\quad$$\quad$$15,000
Actual direct labor hours (DLHr) $\quad$$\quad$480 hours
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: 
Production volume $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 6,000 units
Estimated variable overhead costs $\quad$$\quad$$13,500
Estimated direct labor hours (DLHr) $\quad$ 600 hours
At the end of the year, actual data were as follows:
Production volume $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$4,000 units
Actual variable overhead costs $\quad$$\quad$$\quad$$15,000
Actual direct labor hours (DLHr) $\quad$$\quad$480 hours
Calculate the variable overhead efficiency variance.

Quizplus · Accepted Answer

Variable overhead efficiency variance measures the difference between actual hours worked and the standard hours allowed for the actual production volume at the budgeted variable overhead rate. 
Variable overhead efficiency variance = (Standard hours allowed - Actual hours worked) x Variable overhead rate 
Standard hours allowed = 0.1 DLHr per unit x 4,000 units = 400 hours 
Variable overhead rate = $13,500 ÷ 600 DLHr = $22.50 per DLHr

Variable overhead efficiency variance = (400 hours - 480 hours) x $22.50 = $1,800 U

Therefore, the correct choice is B, $1,800 U.

Elite Brands Company Uses Standard Costs for Their Manufacturing Division \quad

Elite Brands Company Uses Standard Costs for Their Manufacturing Division $\quad$