Underfoot Products uses standard costing. The following information about overhe

Question

Underfoot Products uses standard costing. The following information about overhead was generated during May:

Using the above information provided for Underfoot Products, compute the variable overhead efficiency variance.

$10,000 (F)

$40,000 (F)

$10,000 (U)

$40,000 (U)

Standard variable overhead rate $2 per machine hour Standard fixed overhead rate $1 per machine hour Actual variable overhead costs $390,000 Actual fixed overhead costs $175,000 Budgeted fixed overhead costs $190,000 Standard machine hours per unit produced 10 Good units produced 18,000 Actual machine hours 200,000

Explanation / Answer

Variable efficiency variance = Variable overhead standard rate per hour (AH -SH)

                                         = 2 [200,000 - (18000*10)]

                                       = 2 [200,000 - 180,000]

                                      = 2 * 20,000

                                    = 40,000 (U)

Correct option is "D"

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