Elite Brands Company uses standard costs for its 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:
What is the variable overhead efficiency variance?

Question

Elite Brands Company uses standard costs for its 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:
 What is the variable overhead efficiency variance?

Quizplus · Accepted Answer

To find the variable overhead efficiency variance, we need to compare the actual direct labor hours used to produce the actual output with the standard hours allowed for the actual output achieved. 
Actual direct labor hours used = 40,000 hours
Actual output achieved = 400,000 units
Standard hours allowed = 0.1 hours per unit x 400,000 units = 40,000 hours

Efficiency variance = Standard hours allowed - Actual hours used 
Efficiency variance = 40,000 hours - 40,000 hours = 0

This means that the actual direct labor hours used were exactly equal to the standard hours allowed for the actual production achieved. Therefore, there is no variance to report, and the answer is B) $1,800 U (not applicable).

Elite Brands Company Uses Standard Costs for Its Manufacturing Division