Question

the maxit corporation has a standard costing system in which variable manufacturing overhead is assigned to production on the basis of standard machine - hours. the following data are available for july:

• actual variable manufacturing overhead cost incurred: $26,140
• actual machine - hours worked: 3,200 hours
• variable overhead rate variance: $5,820 u
• total variable overhead spending variance: $8,140 u

the variable overhead efficiency variance for july is:
multiple choice
$13,960 f
$2,320 f
$2,320 u
$13,960 u

Explanation:

Step1: Recall the formula for total variable overhead spending variance

The formula for total variable overhead spending variance is \( \text{Total variable overhead spending variance}=\text{Variable overhead rate variance}+\text{Variable overhead efficiency variance} \).

Step2: Rearrange the formula to solve for variable overhead efficiency variance

We can rewrite the formula as \( \text{Variable overhead efficiency variance}=\text{Total variable overhead spending variance}-\text{Variable overhead rate variance} \).

Step3: Substitute the given values into the formula

We are given that the total variable overhead spending variance is \( \$8,140\ U \) (unfavorable, so \(+ 8140\)) and the variable overhead rate variance is \( \$5,820\ U \) (unfavorable, so \(+5820\)).

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Since the total spending variance (\(8140\ U\)) and rate variance (\(5820\ U\)) are both unfavorable, and \(8140>5820\), the efficiency variance is also unfavorable.

Answer:

\(\$2,320\ U\)