A manufacturing company that has only one product has established the following standards for Its varlable manufacturing overhead. The company bases Its varlable manufacturing overhead standards on direct labor-hours. 3. 20 direct 1labor-hours Standard hours per unit of output Standard variable overhead rate $10.55 per direct labor-hour The follawing data pertain to operations for the last month: Actual direct labor-hours 9,400 direct labor-hours $ 95,780 Actual total variable manufacturing overhead cost Actual output 2,700 units What is the veariable overhesd efficlency veriance for the month? Multiple Choic $4.272 U $7.573 $7.573U
A manufacturing company that has only one product has established the following standards for Its varlable manufacturing overhead. The company bases Its varlable manufacturing overhead standards on direct labor-hours. 3. 20 direct 1labor-hours Standard hours per unit of output Standard variable overhead rate $10.55 per direct labor-hour The follawing data pertain to operations for the last month: Actual direct labor-hours 9,400 direct labor-hours $ 95,780 Actual total variable manufacturing overhead cost Actual output 2,700 units What is the veariable overhesd efficlency veriance for the month? Multiple Choic $4.272 U $7.573 $7.573U
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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![A manufacturing company with only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours.
- **Standard hours per unit of output:** 3.20 direct labor-hours
- **Standard variable overhead rate:** $10.55 per direct labor-hour
The following data pertain to operations for the last month:
- **Actual direct labor-hours:** 9,400 direct labor-hours
- **Actual total variable manufacturing overhead cost:** $95,788
- **Actual output:** 2,700 units
**Question:** What is the variable overhead efficiency variance for the month?
**Multiple Choice:**
- $4,272 U
- **$7,573 F** (Selected)
- $7,573 U
- $8,018 U
**Explanation:**
To calculate the variable overhead efficiency variance, use the formula:
\[ \text{Variable Overhead Efficiency Variance} = (\text{Standard Hours for Actual Output} - \text{Actual Hours}) \times \text{Standard Rate} \]
- Standard Hours for Actual Output = Actual Output × Standard hours per unit
- = 2,700 units × 3.20 hours/unit = 8,640 hours
- Actual Hours = 9,400 hours
- Standard Rate = $10.55
\[ \text{Variance} = (8,640 - 9,400) \times 10.55 = -760 \times 10.55 = -$8,018 \]
This is an unfavorable variance (U) because actual hours exceed the standard hours allowed for the actual output. Thus, the correct answer is $8,018 U.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8ad6af2d-5a67-42f5-a474-673e389551ed%2F62077357-329c-4937-878c-afe34db045fa%2Fkr8jas9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A manufacturing company with only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours.
- **Standard hours per unit of output:** 3.20 direct labor-hours
- **Standard variable overhead rate:** $10.55 per direct labor-hour
The following data pertain to operations for the last month:
- **Actual direct labor-hours:** 9,400 direct labor-hours
- **Actual total variable manufacturing overhead cost:** $95,788
- **Actual output:** 2,700 units
**Question:** What is the variable overhead efficiency variance for the month?
**Multiple Choice:**
- $4,272 U
- **$7,573 F** (Selected)
- $7,573 U
- $8,018 U
**Explanation:**
To calculate the variable overhead efficiency variance, use the formula:
\[ \text{Variable Overhead Efficiency Variance} = (\text{Standard Hours for Actual Output} - \text{Actual Hours}) \times \text{Standard Rate} \]
- Standard Hours for Actual Output = Actual Output × Standard hours per unit
- = 2,700 units × 3.20 hours/unit = 8,640 hours
- Actual Hours = 9,400 hours
- Standard Rate = $10.55
\[ \text{Variance} = (8,640 - 9,400) \times 10.55 = -760 \times 10.55 = -$8,018 \]
This is an unfavorable variance (U) because actual hours exceed the standard hours allowed for the actual output. Thus, the correct answer is $8,018 U.
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