Chapter 10 Quiz Saved Help Save&Exit; Submit Wadding Corporation applies manufac

Question

Chapter 10 Quiz Saved Help Save&Exit; Submit Wadding Corporation applies manufacturig overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 5,400 machine-hours. Budgeted and actual overhead costs for the month appear below Original Budget Based on 5,400 Machine-Hours Actual Costs 002421 Variable overhead costs: Supplies Indirect labor 12,540 52,800 13,630 53,570 Pixed overhead costs: Supervision Utilities Factory depreciation 21,500 7,700 8,700 $103,240 21,140 7,750 9,010 $105,100 Total overhead cost The company actually worked 5,420 machine-hours during the month. The standard hours allowed for the actual output were 5,410 machine-hours for the month. What was the overall variable overhead efficiency variance for the month? Multiple Choice Prex 9 of 10Next

Explanation / Answer

Original Budget:

Machine-hours = 5,400

Variable Overhead Costs = Supplies + Indirect Labor
Variable Overhead Costs = $12,540 + $52,800
Variable Overhead Costs = $65,340

Standard Variable Overhead rate per machine hour = Variable Overhead Costs / Number of machine hours
Standard Variable Overhead rate per machine hour = $65,340 / 5,400
Standard Variable Overhead rate per machine hour = $12.10

Actual machine-hours = 5,420
Standard machine-hours allowed = 5,410

Variable Overhead Efficiency Variance = Standard Variable Overhead rate per machine hour * (Actual machine-hours - Standard machine-hours allowed)
Variable Overhead Efficiency Variance = $12.10 * (5,420 - 5,410)
Variable Overhead Efficiency Variance = $121 Unfavorable

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