The management of Green Energy Manufacturing is analyzing variable overhead vari

Question

The management of Green Energy Manufacturing is analyzing variable overhead variances for the fiscal period just ended. The flexible budget called for $176,000 in variable overhead but actual variable overhead was $100,000. In computing the overhead variances, Green’s management discovered that it had used 40,000 pounds of direct material, rather than the budgeted amount of 44,000 pounds. (Pounds of direct material is the single overhead driver of variable overhead). The standard variable overhead rate per pound of direct material is $2.00.

What is Green's variable overhead efficiency variance?

$ 8,000 (U)

$16,000 (F)

$24,000 (U)

$ 8,000 (F)

Blue Lite manufactures decorative weather vanes that have a standard materials cost of two pounds of raw materials at $2 per pound. During November 500 pounds of raw materials costing $4 per pound were used in making 450 weather vanes. The materials price and quantity variance are:

Material Price Variance 1,000 U, Material Quantity variance 800 U

Material Price Variance 500 U, Material Quantity variance 400 F

Material Price Variance 1,000 F, Material Quantity variance 800 F

Material Price Variance 500 F, Material Quantity variance 400 U

$ 8,000 (U)

$16,000 (F)

$24,000 (U)

$ 8,000 (F)

Explanation / Answer

Variable overhead efficiency variance =2*(44000-40000) = $8000F Option D is correct 2 Material Price Variance = 500*(4-2) = 1000U Material Quantity variance = 2*(500-450*2) = 800F

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