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Bressman Inc. has provided the following data concerning one of the products in its standard cost system.

Variable manufacturing overhead is applied to products on the basis of direct labor-hours.
Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate
Variable manufacturing overhead 0.20 hours $6.70 per hour The company has reported the following actual results for the product for May: Actual output 9,300 units Actual direct labor-hours 1,820 hours Actual variable overhead cost $ 12,558 The variable overhead efficiency variance for the month is closest to:

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Answer:

$268 Favorable

Explanation:

Variable overhead variance can be computed by using the following formula,

Budgeted hours = 0.20/unit

Variable overhead efficiency variance

= Standard Overhead rate * (Actual Hours - Standard Hours)

= 6.7 * ( 1,820 - (9300*0.2))

Efficiency variance = $268 Favorable, as actual hours for actual activity are less than standard hours at actual activity.

Hope that helps.

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