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Variable Overhead Efficiency Variance Calculations

1. V Company's product has a labor standard of 2 hours per unit. For 2011, it estimates its production will be 200,000 units (400,000 DLHs). It budgets total overhead at $900,000, which results in a fixed overhead rate of $1.50 per hour. Actual data for the year includes: Actual production, 198,000 units (440,000 DLHs), Actual variable overhead, $352,000, Actual fixed overhead, $575,000 The variable overhead efficiency variance for the year is:
a. $66,000 unfavorable
b. $35,520 favorable
c. $33,000 favorable
d. $33,000 unfavorable

2. This month R Company planned to produce 3,000 units of its product. The standard cost card calls for six pounds of material at $0.30 per pound. Actual production for the month was 3,100 units, resulting in a favorable price variance of $380 and an unfavorable quantity variance of $120. Based on these variances, one could conclude that:
a. More materials were purchased than were used
b. The actual cost of material was less than the standard cost
c. The actual usage of material was less than the standard allowed
d. The actual cost and usage of material were both less than standard

Solution Preview


1.50 / 2 = 0.75

0.75 x 440,000 = 330,000 = ACTUAL

198,000 x 2 = 396,000
0.75 x 396,000 = 297,000 = STANDARD

330,000 - 297,000 = ...

Solution Summary

This solution provides the correct answer with explanation and all necessary calculations to the cost accounting/variance questions listed.