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28 October, 07:51

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours. Standard hours per unit of output 3.20 DLHs Standard variable overhead rate $ 10.55 per DLH The following data pertain to operations for the last month: Actual direct labor-hours 9,400 DLHs Actual total variable manufacturing overhead cost $ 95,780 Actual output 2,700 units What is the variable overhead efficiency variance for the month?

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  1. 28 October, 09:08
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    Variable overhead efficiency variance $ 8,018 Unfavorable

    Explanation:

    Variable overhead efficiency variance: Variable overhead efficiency variance aims to determine whether or not their exist savings or extra cost incurred on variable overhead as a result of workers being faster or slower that expected.

    Since the variable overhead is charged using labour hours, any amount by which the actual labour hours differ from the standard allowable hours would result in a variance

    Hours

    2,700 units should have taken (2,700 * 3.20) 8640

    but did take (actual hours) 9,400

    Efficiency variance in hours 760 unfavorable

    standard variable overhead cost per hour $10.55

    Variable overhead efficiency variance $ 8,018 Unfavorable

    Variable overhead efficiency variance $ 8,018 Unfavorable
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