Question

Dowen Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 4,400 machine-hours. Budgeted and actual overhead costs for the month appear below: The company actually worked 4,460 machine-hours during the month. The standard hours allowed for the actual output were 4,310 machine-hours for the month. What was the overall variable overhead efficiency variance for the month

Answer 1

Answer: $1,695 Unfavorable

Step-by-step explanation:

Efficiency variance = Standard variable overhead cost per hour * (Standard hours - Actual hours)

Standard variable overhead cost per hour = Budgeted variable overhead / Budgeted machine hours

= (21,560 + 20,720) / 4,400 hours

= $11.30 per hour

Efficiency variance = 11.30 * (4,310 - 4,460)

= 11.30 * -150

= -$1,695

= $1,695 Unfavorable