The Euro Company Wants to Compare the Performance of Three

question 22

Multiple Choice

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
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The variable overhead efficiency variance for March for the German Business Unit is

• A)£8,100 favourable.
• B)£6,667 favourable.
• C)£8,100 unfavourable.
• D)£4,667 unfavourable.

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