Creger Corporation, which makes landing gears, has provided the following data for a recent month: Budgeted production 7,900gearsStandard machine-hours per gear 9.3machine-hoursBudgeted supplies cost$6.20per machine-hourActual production 8,300gearsActual machine-hours 76,930machine-hoursActual supplies cost (total)$479,438 ?Required: ?Determine the rate and efficiency variances for the variable overhead item supplies and indicate whether those variables are favorable or unfavorable.
What will be an ideal response?
Variable overhead rate variance = (AH × AR) ? (AH × SR)
= $479,438 ? (76,930 hours × $6.20 per hour)
= $479,438 ? $476,966
= $2,472 U
Standard machine-hours allowed for the actual output = 9.3 hours per unit × 8,300 units = 77,190 hours
Variable overhead efficiency variance = (AH - SH) × SR
= (76,930 hours ? 77,190 hours) × $6.20 per hour
= (?260 hours) × $6.20 per hour
= $1,612 F
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