Gilder Corporation makes a product with the following standard costs: The company reported the following results concerning this product in June. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for June is:
A)$240 U
B)$216 U
C)$240 F
D)$216 F

Question

Gilder Corporation makes a product with the following standard costs:  The company reported the following results concerning this product in June.  The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for June is:
A)$240 U 
B)$216 U 
C)$240 F 
D)$216 F

Quizplus · Accepted Answer

To calculate the variable overhead efficiency variance, we need to compare the actual amount of direct labor hours worked during the period to the standard hours allowed for the actual output.

Actual direct labor hours = 5,200

Standard direct labor hours allowed = 2,800 (14,000 units * 0.2 hours per unit)

Variable overhead rate per direct labor hour = $2.50 per hour

Variable overhead efficiency variance = (actual hours - standard hours allowed) * variable overhead rate per hour
                                      = (5,200 - 2,800) * $2.50
                                      = $6,000 F

Therefore, the correct answer is C, $240 F.

Gilder Corporation Makes a Product with the Following Standard Costs