Heather's Pillow Company manufactures pillows. The 20X5 operating budget is based on the production of 20,000 pillows with 0.5 machine-hour allowed per pillow. Variable manufacturing overhead is anticipated to be $220,000.
Actual production for 20X5 was 18,000 pillows using 9,500 machine hours. Actual variable costs were $20 per machine hour.
Calculate the variable overhead spending and efficiency variances.
Variable Overhead Variances
In standard costing, the standard cost for variable overhead per unit is usually expressed as a rate per driver unit, and this means that the spending and efficiency part of the total variable overhead variance can be calculated.
Answer and Explanation: 1
Note that the standard variable overhead cost per machine hour = $220,000 / (20,000 x 0.50 = 10,000) = $22. We calcuate the variable overhead...
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fromChapter 3 / Lesson 5
Learn what a variance in accounting is and understand its formula. Discover the different types of variances and explore the significance of variance analysis.