Bondi Corporation makes automotive engines. For the most recent month, budgeted production was 1,500 engines. The standard power cost is $3.10 per machine-hour. The company's standards indicate that each engine requires 9.3 machine-hours. Actual production was 1,800 engines. Actual machine-hours were 15,860 machine-hours. Actual power cost totaled $51,593.Required:Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable.
What will be an ideal response?
Variable overhead rate variance = (AH × AR) ? (AH × SR)
= $51,593 ? (15,860 hours × $3.10 per hour)
= $51,593 ? $49,166
= $2,427 U
Standard machine-hours allowed for the actual output = 9.3 hours per unit × 1,800 units = 16,740 hours
Variable overhead efficiency variance = (AH - SH) × SR
= (15,860 hours ? 16,740 hours) × $3.10 per hour
= (?880 hours) × $3.10 per hour
= $2,728 F
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