Westfield Distribution handles order fulfillment for several online retailers. When a customer places an order on a client's website, the order is sent to Westfield, which picks, packs, and ships the items. Westfield uses a predetermined variable overhead rate based on direct labor hours. According to company standards, each item requires 0.05 direct labor hours to process, and the variable overhead rate is $7.25 per direct labor hour. In August, Westfield shipped 125,000 items using 5,900 direct labor hours. The company incurred total variable overhead costs of $42,780. Calculate the variable overhead efficiency variance for August.

Westfield Distribution handles order fulfillment for several online retailers. When a customer places an order on a client's website, the order is sent to Westfield, which picks, packs, and ships the items. Westfield uses a predetermined variable overhead rate based on direct labor hours. According to company standards, each item requires 0.05 direct labor hours to process, and the variable overhead rate is $7.25 per direct labor hour. In August, Westfield shipped 125,000 items using 5,900 direct labor hours. The company incurred total variable overhead costs of $42,780. Calculate the variable overhead efficiency variance for August.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 33P: Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs...

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