Zacher Corporation makes a product with the following standards for direct labor

Question

Zacher Corporation makes a product with the following standards for direct labor and variable overhead:

In February, the company's budgeted production was 4,400 units, but the actual production was 4,650 units. The company used 1,230 direct labor-hours to produce this output. The actual variable overhead cost was $13,131. The company applies variable overhead on the basis of direct labor-hours.

The variable overhead efficiency variance for February is:

$1,690 F

$1,650 F

$1,690 U

$1,650 U

Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct labor 0.3 hours $24.00 per hour $7.20 Variable overhead 0.3 hours $10.00 per hour $3.00

Explanation / Answer

ans) Option (B)

Standard hours = 4650 X 0.3 = 1395

  Variable overhead efficiency variance = (AH SH) SR

= ( 1230 - 1395) X 10

= 1650 Favourable

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