I have struggled with this homework problem for a while and still don't get any of the multiple choice answers listed. I have applied the formula :
variable overhead efficiency variance= (actual hours x standard rate) - (standard hours allowed x standard rate). I have used the factored formula:

variable overhead efficiency variance = std rate( actual hrs -std hrs allowed)

I come up with 360?? What am I doing wrong?

The Litton Company has established standards as follows:
Direct material 3 lbs. @ $4/lb. = $12 per unit
Direct labor 2 hrs. @ $8/hr. = $16 per unit
Variable manuf. Overhead 2 hrs. @ $5/hr. = $10 per unit

Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.
Units produced 600
Direct material used 2,000 lbs.
Direct material purchased (3,000 lbs.) $11,400
Direct labor cost (1,100 hrs.) $ 9,240
Variable manuf. Overhead cost incurred $ 5,720

The company applies variable manufacturing overhead to products on the basis of direct labor hours.

[B] The variable overhead efficiency variance is:
A) $520 F. C) $500 U.
B) $520 U. D) $500 F

Hello Bella,

Can you show us how you get your answer $360?

Quote:

---

Originally Posted by bella serra

I have struggled with this homework problem for a while and still dont get any of the multiple choice answers listed. I have applied the formula :
variable overhead effeciency variance= (actual hours x standard rate) - (standard hours allowed x standard rate). I have used the factored formula:

variable overhead effeciency variance = std rate( actual hrs -std hrs allowed)

I come up with 360???? What am I doing wrong?

The Litton Company has established standards as follows:
Direct material 3 lbs. @ $4/lb. = $12 per unit
Direct labor 2 hrs. @ $8/hr. = $16 per unit
Variable manuf. Overhead 2 hrs. @ $5/hr. = $10 per unit

Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.
Units produced 600
Direct material used 2,000 lbs.
Direct material purchased (3,000 lbs.) $11,400
Direct labor cost (1,100 hrs.) $ 9,240
Variable manuf. overhead cost incurred $ 5,720

The company applies variable manufacturing overhead to products on the basis of direct labor hours.

[B] The variable overhead efficiency variance is:
A) $520 F. C) $500 U.
B) $520 U. D) $500 F

---

Here is what I calculated:
Standard = $5/hr at 1200 hrs... $6000
Actual = $4.77/hr at 1100 hrs... $5720

Therefore using the formula : Standard Rate(Actual hrs - Standard hrs allowed)
5(1100-1200) = -500 or 500F
Am I correct on this?

Your answer is correct but I found a minor error. The error is bolden.

Actual = $4.77/hr at 1100 hrs... $5720