Long,Inc.produces small engines.For last year's operations,the following data were gathered: Long,Inc.employs a standard costing system.During the year,a variable overhead rate of $8.00 per hour was used.The labour standard requires 1.5 hours per unit produced.What are the variable overhead spending and efficiency variances,respectively?
$\begin{array}{ll}
\text { Units produced: } & 100,000 \
\text { Direct labour: } & 160,000 \text { hours }@\$ 12.00 \text { per } \
& \text { hour } \
\text { Actual variable overhead: } & \$ 1,300,000
\end{array}$
A)$20,000 U and $80,000 U
B)$20,000 U and $80,000 F
C)$100,000 U and $20,000 U
D)$100,000 U and $20,000 F

Question

Quizplus · Accepted Answer

Variable overhead spending variance = (Actual variable overhead - Applied variable overhead)= (1,300,000 - (100,000 * 8))= (1,300,000 - 800,000)= $20,000 UVariable overhead efficiency variance = (Applied variable overhead - Standard variable overhead)= (100,000 * 8 - (100,000 * 1.5 * 12))= (800,000 - 1,800,000)= $80,000 U

Long,IncProduces Small Engines A)$20,000 U and $80,000 U B)$20,000 U and $80,000 F

Long,IncProduces Small Engines A)$20,000 U and $80,000 U
B)$20,000 U and $80,000 F