Question 1

Section A

PowerGen Utilities absorbs variable overheads based on labor hours. The standard variable overhead rate is $8 per labor hour. Standard time per unit is 2 hours. Actual production was 5,000 units, taking 10,500 labor hours. What is the variable overhead efficiency variance?

Accepted Answer

Compare the standard hours allowed for actual production against the actual hours worked. Multiply the difference by the standard variable overhead rate.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using actual production units instead of hours, or confusing efficiency with expenditure variance.

Section A

PowerGen Utilities absorbs variable overheads based on labor hours. The standard variable overhead rate is $8 per labor hour. Standard time per unit is 2 hours. Actual production was 5,000 units, taking 10,500 labor hours. What is the variable overhead efficiency variance?

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 3

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