Pearle Corporation makes automotive engines. For the most recent month, budgeted production was 3,300 engines. The standard power cost is $9.20 per machine-hour. The company's standards indicate that each engine requires 2.1 machine-hours. Actual production was 3,400 engines. Actual machine-hours were 7,160 machine-hours. Actual power cost totaled $61,815.

Required:

a) Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable. (Input all amounts as positive values.)

Question

Business

Middleton

17 December, 14:21

Pearle Corporation makes automotive engines. For the most recent month, budgeted production was 3,300 engines. The standard power cost is $9.20 per machine-hour. The company's standards indicate that each engine requires 2.1 machine-hours. Actual production was 3,400 engines. Actual machine-hours were 7,160 machine-hours. Actual power cost totaled $61,815.

Required:

a) Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable. (Input all amounts as positive values.)

+1

Answers (1)

Know the Answer?

Miller · Answer 1

Rate variance = $4057 Favorable

Efficiency variance = $184 unfavorable

Explanation:

Rate variance $

7,160 hours should have cost (7,160 * $9.20) 65872

bur did cost (actual cost) 61,815

Rate variance 4057 Favorable

Efficiency variance

3400 units should have taken (3,400 * 2.1 hours) 7140

but did take 7,160

Efiicienct=y varince (hours) 20 unfavorable

standard hour * $9.20

Efficiency variance $184 unfavorable

Rate variance = $4057 Favorable

Efficiency variance = $184 unfavorable