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THE FOLLOWING INFORMATION IS USED FOR QUESTIONS 1 8. Test Company uses a standard costing system. The company developed the following standard cost sheet for

THE FOLLOWING INFORMATION IS USED FOR QUESTIONS 1 8.

Test Company uses a standard costing system. The company developed the following standard cost sheet for one of its products.

Direct materials

(6 lbs. @ $5 per lb.)

$30

Direct labor

(1.5 hours @ $10 per hour)

15

Variable overhead

(1.5 hours @ $4 per hour)

6

Fixed overhead

(1.5 hours @ $2 per hour assuming 17,000 hours)

3

During the year, Test Company recorded the following actual results.

Units produced

12,000

Direct materials

(71,750 lbs. purchased and used)

$365,925

Direct labor

(17,900 hours)

182,580

Variable overhead

69,000

Fixed overhead

33,000

Determine the variable overhead efficiency variance.

$400 favorable

$2,700 favorable

$400 unfavorable

$2,700 unfavorable

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