Show all the work 4. The following information pertains to Gina Production Compa
ID: 2522354 • Letter: S
Question
Show all the work
4. The following information pertains to Gina Production Company costs for 2017: Actual cost data for 5,500 units: Actual factory overhead costs ($16,500 is fixed)$ 31,625 Actual direct labor costs (11,500 hours) $134,550 Standard cost data for 5,000 units: Direct labor hours Labor rate Variable factor overhead Fixed factory overhead 2 hours/unit $12.00/unit $22,500 13,500 If the variable overhead rate is applied based upon direct labor hours, what is the variable overhead efficiency variance for Gina Production Company? a. $1,125 F b. $2,250 U c. $1,125 U d. $2,250 FExplanation / Answer
Standard variable overhead absorption rate
Total standard labor hours
= Labor hour per unit x Number of units
= 2 x 5,000
= 10,000 labor hours
Variable overhead rate per labor hour
= Standard variable overhead / Total standard labor hours
= $22,500 / 10,000
= $2.25 per labor hour
Standard hours for actual production
= Actual production x Standard hour per unit
= 5,500 x 2
= 11,000 labor hours
So, Variable overhead efficiency variance
= (Standard hours – Actual hours) x Standard rate
= (11,000 – 11,500) x $2.25
= $1,125 Unfavorable
The variance is unfavorable as the actual labor hours is more than the standard labor hours
So, as per above discussion, option c is the correct option