Question

Tharaldson Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		7.0	ounces	$	3.00	per ounce	$	21.00
Direct labor		0.3	hours	$	14.00	per hour	$	4.20
Variable overhead		0.3	hours	$	9.00	per hour	$	2.70

The company reported the following results concerning this product in June.

Originally budgeted output		2,400	units
Actual output		2,900	units
Raw materials used in production		22,000	ounces
Purchases of raw materials		23,100	ounces
Actual direct labor-hours		550	hours
Actual cost of raw materials purchases	$	45,000
Actual direct labor cost	$	12,400
Actual variable overhead cost	$	3,200

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead efficiency variance for June is:

Answer 1

Answer-The variable overhead efficiency variance for June is =$2880 F.

Explanation-Variable overhead efficiency variance=(Standard hours–Actual working hours)*Standard Rate

= ($870 hours - $550 hours)*$9.00 per hour   

= $2880 Favorable

Where- Standard hours = Standard hours per unit*Actual units

=0.3 standard hours per unit*2900 units

= 870 hours