QUESTION6 The following standards for variable one product overlh facturing over
ID: 2402569 • Letter: Q
Question
QUESTION6 The following standards for variable one product overlh facturing overhead have been established for a company that makes only Standard hours per unit of output..- 1.2 hours Standard variable overhead rate.... $10.20 per frour The following data pertain to operations for the last month Actual hours.. Actual total variable overhead cos.. $$2.750 Actual output 5,000 hours 4,000 units What is the variable overhead efficiency variance for the month? O $1,680 F O $2,040 U O $2,110 U O $3,790 U QUESTION7 Which cost is not relevant in making financial decisions? O Sunk costs. Opportunity costs. Incremental costs. ) All three are relevant.Explanation / Answer
Question 6
Variable Overhead Efficiency Variance
Standard Hours Allowed for actual production:
Actual Production
4,000
Units
x Allowed Standard Hours Per Unit
1.2
Hours
Total Standard Hours Allowed for actual production (SHAP)
4800
Hours
Actual Hours Worked (AH)
5000
Hours
Variance or Difference in Hours
200
hours
x Standard Hourly Variable Overhead Rate
$10.20
per hour
Variable Overhead Efficiency Variance
$2,040
Unfavorable
The correct option is $2,040 U.
Here the Actual Hours worked is higher than anticipated hours to be worked to get actual production units, hence the variance is Unfavorable.
Question 7
The correct option is Sunk Cost.
Sunk Cost is the cost which has already been incurred in the past and does not have any impact on the decision making. Sunk costs are irrelevant.
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Standard Hours Allowed for actual production:
Actual Production
4,000
Units
x Allowed Standard Hours Per Unit
1.2
Hours
Total Standard Hours Allowed for actual production (SHAP)
4800
Hours
Actual Hours Worked (AH)
5000
Hours
Variance or Difference in Hours
200
hours
x Standard Hourly Variable Overhead Rate
$10.20
per hour
Variable Overhead Efficiency Variance
$2,040
Unfavorable