Using the same data (standard 2 hours per unit, £3 per hour, 2,000 units made, 4,050 hours worked), what is the variable overhead efficiency variance?
Answer and explanation
Correct answer: C. £150 adverse
- Step 1: Standard hours for 2,000 units = 4,000.
- Step 2: Hours worked = 4,050, i.e. 50 hours more than standard.
- Step 3: Efficiency variance = 50 × £3 = £150 adverse.
Answer
£150 adverse.
Why not the others: £450 adverse: This is the expenditure variance and not the efficiency variance. £150 favourable: The hours worked exceed the standard for the output, so it is adverse. £600 adverse: This is the total variable overhead variance, not the efficiency variance.
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