The Following Standards for Variable Manufacturing Overhead Have Been Established

question 134

Essay

The following standards for variable manufacturing overhead have been established for a company that makes only one product:
$$\begin{array} { | l | r | } \hline \text { Standard hours per unit of output } & 6.9 \text { hours } \\\hline \text { Standard variable overhead rate } & \$ 15.80 \text { per hour } \\\hline\end{array}$$
The following data pertain to operations for the last month:
$\begin{array}{|l|r|}\hline \text { Actual hours } & 6,100 \text { hours } \\\hline \text { Actual total variable overhead cost } & \$ 97,600 \\\hline \text { Actual output } & 800 \text { units } \\\hline\end{array}$
Required:
a)What was the variable overhead spending variance for the month?
b)What was the variable overhead efficiency variance for the month?

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Definitions:

Globalisation

The worldwide interdependence of resource flows, product markets, and business competition.

Outsourcing

Is a decision to allow one or more of a company’s value chain activities to be performed by onshore independent specialist companies that focus all their skills and knowledge on just one kind of activity.

Bona Fide

Genuine; real; without intention to deceive or any fraud involved.