Question

juhasz corporation makes a product with the following standards for direct labor and variable overhead:

direct labor: standard quantity or hours 0.40 hours, standard price or rate $36.00 per hour
variable overhead: standard quantity or hours 0.40 hours, standard price or rate $ 5.60 per hour

in august the company produced 9,500 units using 3,950 direct labor-hours. the actual variable overhead cost was $20,935. the company applies variable overhead on the basis of direct labor-hours.

the variable overhead efficiency variance for august is:

multiple choice
$840 f
$795 u
$840 u
$795 f

Explanation:

Step1: Calculate standard hours

Standard hours = Units produced × Standard hours per unit
Standard hours = \(9500\times0.40 = 3800\) hours

Step2: Calculate variable overhead efficiency variance

Variable overhead efficiency variance formula: \( (AH - SH)\times SR\)
Where \(AH = 3950\) (actual hours), \(SH = 3800\) (standard hours), \(SR=\$5.60\) (standard rate per hour)
\((3950 - 3800)\times5.60\)
\(=150\times5.60\)
\(=\$840\)
Since actual hours (\(AH\)) > standard hours (\(SH\)), the variance is unfavorable (U)

Answer:

\(\$840\) U