Overhead costs are applied using direct labour hours. The following were budgeted for the year: Planned production (units) 50,000 Direct labour hours 200,000 Variable overhead 1,000,000 Fixed overhead 600,000 The following were the actual results: Actual production (units) 48,000 Direct labour hours 195,000 Variable overhead 950,000 Fixed overhead 610,000 Calculate the variable overhead efficiency variance. Select one: a. $15,000 U b. $25,000 U c. $25,000 F d. $15,000 F
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
| Planned production (units) | 50,000 |
| Direct labour hours | 200,000 |
| Variable overhead | 1,000,000 |
| Fixed overhead | 600,000 |
The following were the actual results:
| Actual production (units) | 48,000 |
| Direct labour hours | 195,000 |
| Variable overhead | 950,000 |
| Fixed overhead | 610,000 |
Calculate the variable overhead efficiency variance.
$15,000 U
$25,000 U
$25,000 F
$15,000 F
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