Question
Able Control Company, which manufactures electrical switches, uses a standard-cost system and carries all inventory at standard. The standard factory overhead costs per switch are
Able Control Company, which manufactures electrical switches, uses a standard-cost system and carries all inventory at standard. The standard factory overhead costs per switch are based on direct labor hours and are shown below. Variable overhead (5 hours at $8.00 per hour) $ 40 Fixed overhead (5 hours at $12.00* per hour) 60 Total overhead $100 *Based on capacity of 300,000 direct labor hours per month. The following information is available for the month of October: 56,000 switches were produced although 60,000 switches were scheduled to be produced. 275,000 direct labor hours were worked at a total cost of $2,550,000. Variable overhead costs were $2,340,000. Fixed overhead costs were $3,750,000. Question The variable overhead efficiency variance for October was A. $60,000 favorable. B. $40,000 favorable. C. $160,000 unfavorable. D. $210,000 unfavorable.
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