Cox Engineering performs cement core tests in its laboratory. The following stan
ID: 2435377 • Letter: C
Question
Cox Engineering performs cement core tests in its laboratory.The following standards have been set for each core test performed:
Direct materials
* Standard hours/quantity 3 pounds
* Standard price/rate $0.75 per pound
Direct labor
* Standard hours/quantity 0.4 hours
* Standard price/rate $12 per hour
Variable manufacturing overhead
* Standard hours/quantity 0.4 hours
* Standard price/rate $9 per hour
During March, the laboratory performed 2,000 core tests.
On March 1 no direct materials (sand) were on hand.
Variable manufacturing overhead is assigned to core tests on the basis of direct labor hours.
The following events occurred during March:
* 8,600 pounds of sand were purchased at a cost of $7,310.
* 7,200 pounds of sand were used for core tests.
* 840 actual direct labor hours were worked at a cost of $8,610.
* Actual variable manufacturing overhead incurred was $3,200.
The variable overhead efficiency variance for March is
1. $320 favorable
2. $320 unfavorable
3. $360 unfavorable
4. $360 favorable
Explanation / Answer
The formula for calculating the variable overhead efficiency variance is
(Actual hours - Standard hours) * Standard variable overhead rate
According to the given information,
Actual hours = 840
Standard hours = 0.4 * 2000
= 800
Standard rate = $9 per hour
Substituting the values in the above formula,we get
Variable overhead efficiency variance = (840 - 800) * $9
= $360 (favourable)
Since the value is positive, the efficiency variance is favorable.
The correct option is 4) $360 favorable.