ExpertMedium2 marksMultiple Choice
ACCA · Question 29 · Standard costing
A company absorbs variable overheads on the basis of direct labor hours.
Standard variable overhead rate: $3 per hour.
Standard time per unit: 4 hours.
Actual production: 2,000 units.
Actual hours worked: 8,200 hours.
Actual variable overhead cost: $25,000.
What is the variable overhead efficiency variance?
A company absorbs variable overheads on the basis of direct labor hours.
Standard variable overhead rate: $3 per hour.
Standard time per unit: 4 hours.
Actual production: 2,000 units.
Actual hours worked: 8,200 hours.
Actual variable overhead cost: $25,000.
What is the variable overhead efficiency variance?
Answer options:
A.
$400 Favorable
B.
$600 Adverse
C.
$1,000 Adverse
D.
$600 Favorable
How to approach this question
Efficiency variance compares the standard hours that should have been worked to the actual hours worked, valued at the standard rate.
Full Answer
B.$600 Adverse✓ Correct
Standard hours for 2,000 units = 2,000 * 4 = 8,000 hours.
Actual hours worked = 8,200 hours.
They took 200 hours longer than expected (Adverse).
Efficiency variance = 200 hours * $3/hour = $600 Adverse.
Common mistakes
Calculating the expenditure variance instead of the efficiency variance.
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