Question

Hexene, Inc. produces a specialized machine part used in forklifts. For last year's operations, the following data were gathered: Units produced 40,000 Direct labor 32,000 hours @ $10.00 Actual variable overhead $140,000 Hexene employs a standard costing system. During the year, a variable overhead rate of $6.00 was used. The labor standard requires 0.75 hours per unit produced. The variable overhead spending and efficiency variances are____________.

a.$45,000 U and $6,500 U.
b.$52,000 F and $12,000 U.
c.$9,600 U and $45,000 F.
d.$16,000 F and $8,400 F.
e.None of these choices are correct.

Answer 1

Answer:

b.$52,000 F and $12,000 U.

Explanation:

The computation is shown below:

Variable overhead spending variance

= (Standard variable overhead Rate ×  Actual Hour) - (Actual Rate × Actual Hour)

= ($6 × 32,000 hours) - ($140,000)

= $192,000 - $140,000

= $52,000 favorable

The (Actual Rate × Actual Hour) is also known as Actual variable overhead

Variable overhead efficiency variance

= (Standard Rate × Standard Hour) - (Standard Rate × Actual Hour)

= ($6 × 0.75 × 40,000 hours) - ($6 × 32,000 hours)

= $180,000 - $192,000

= $12,000 unfavorable