Glendale 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: $$\begin{array} { | l | l | }
\hline \text { Production volume } & 6,300 \text { units } \
\hline \text { Budgeted variable overhead costs } & \$ 13,500 \
\hline \text { Budgeted direct labor hours (DLHr) } & 630 \text { hours } \
\hline
\end{array}$$ At the end of the year,actual data were as follows:
$$\begin{array} { | l | l | }
\hline \text { Production volume } & 4,000 \text { units } \
\hline \text { Actual variable overhead costs } & \$ 15,400 \
\hline \text { Actual direct labor hours (DLHr) } & 495 \text { hours } \
\hline
\end{array}$$ What is the variable overhead efficiency variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

Question

Glendale 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: $$\begin{array} { | l | l | } 
\hline \text { Production volume } & 6,300 \text { units } \
\hline \text { Budgeted variable overhead costs } & \$ 13,500 \
\hline \text { Budgeted direct labor hours (DLHr) } & 630 \text { hours } \
\hline
\end{array}$$ At the end of the year,actual data were as follows:
$$\begin{array} { | l | l | } 
\hline \text { Production volume } & 4,000 \text { units } \
\hline \text { Actual variable overhead costs } & \$ 15,400 \
\hline \text { Actual direct labor hours (DLHr) } & 495 \text { hours } \
\hline
\end{array}$$ What is the variable overhead efficiency variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

Quizplus · Accepted Answer

The variable overhead efficiency variance is calculated as the difference between the actual hours worked and the standard hours allowed for the actual production, multiplied by the standard variable overhead rate per hour. The standard variable overhead rate per hour is calculated as the budgeted variable overhead costs divided by the budgeted direct labor hours, which is $13,500 / 630 hours = $21.43 per hour. The standard hours allowed for the actual production is 0.1 hours per unit * 4,000 units = 400 hours. The actual hours worked are 495 hours. Therefore, the efficiency variance is (495 hours - 400 hours) * $21.43 per hour = 95 hours * $21.43 per hour = $2,035.85, which rounds to $2,036 unfavorable (U) because more hours were worked than were budgeted for the actual production level.

Glendale Brands Company Uses Standard Costs for Its Manufacturing Division