Pardoe Inc. ,manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours.The company uses a standard cost system and has established the following standards for one unit of product: During March,the following activity was recorded by the company: • The company produced 3,000 units during the month.
• A total of 8,000 pounds of material were purchased at a cost of $23,000.
• There was no beginning inventory of materials on hand to start the month;at the end of the month,2,000 pounds of material remained in the warehouse.
• During March,1,600 direct labor-hours were worked at a rate of $6.50 per hour.
• Variable manufacturing overhead costs during March totaled $1,800.
The direct materials purchases variance is computed when the materials are purchased.
The variable overhead efficiency variance for March is:

Question

Pardoe Inc. ,manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours.The company uses a standard cost system and has established the following standards for one unit of product:  During March,the following activity was recorded by the company: • The company produced 3,000 units during the month.
• A total of 8,000 pounds of material were purchased at a cost of $23,000.
• There was no beginning inventory of materials on hand to start the month;at the end of the month,2,000 pounds of material remained in the warehouse.
• During March,1,600 direct labor-hours were worked at a rate of $6.50 per hour.
• Variable manufacturing overhead costs during March totaled $1,800.
The direct materials purchases variance is computed when the materials are purchased.
The variable overhead efficiency variance for March is:

Quizplus · Accepted Answer

SH = 3,000 units × 0.6 hours per unit = 1,800 hours
Variable overhead efficiency variance = (AH − SH)× SR
= (1,600 hours − 1,800 hours)× $1.25 per hour
= (-200 hours)× $1.25 per hour
= $250 F