Juhasz Corporation makes a product with the following standards for direct labor and variable overhead:

Juhasz Corporation makes a product with the following standards for direct labor and variable overhead:

	Standard Quantity or Hours			Standard Price or Rate
Direct labor		0.70	hours	$	32.00	per hour
Variable overhead		0.70	hours	$	5.20	per hour

In August the company produced 9,100 units using 6,500 direct labor-hours. The actual variable overhead cost was $31,850. The company applies variable overhead on the basis of direct labor-hours.

The variable overhead efficiency variance for August is:

Multiple Choice

• $637 F
• $637 U
• $676 U

  Correct
• $676 F

Explanation

SH = 9,100 units × 0.70 hours per unit = 6,370 hours

Variable overhead efficiency variance = (AH – SH) × SR

= (6,500 hours − 6,370 hours) × $5.20 per hour

= (130 hours) × $5.20 per hour

= $676 U