Question

Comfort Company manufactures pillows. The 2020 operating budget is based on production of 1,000 pillows with 0.50 machine-hour allowed per pillow. Budgeted variable overhead per hour was $10. Actual production for 2020 was 750 pillows using 400 machine-hours. Actual variable costs were $9 per machine-hour.

Required: Calculate the variable overhead spending and efficiency variances.

Answer 1

• 1

Variable Overhead Spending Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                             10.00	-	$                       9.00	)	x	400
	400
	Variance		$                  400.00			Favourable-F

• 2

Variable Overhead Efficiency Variance
(	Standard Hours = 750 pillows x 0.5 hrs	-	Actual Hours	)	x	Standard Rate
(	375	-	400	)	x	$                        10.00
	-250
	Variance		$                  250.00			Unfavourable-U