ExpertMedium2 marksMultiple Choice
ACCA · Question 26 · Standard costing
Section A
AgriTech uses automated harvesters. They calculate a variable overhead efficiency variance at the end of the harvest season.
What does the variable overhead efficiency variance measure?
Section A
AgriTech uses automated harvesters. They calculate a variable overhead efficiency variance at the end of the harvest season.
What does the variable overhead efficiency variance measure?
Answer options:
A.
The difference between actual variable overheads incurred and budgeted variable overheads.
B.
The difference between the standard hours allowed for actual production and the actual hours worked, valued at the standard variable overhead rate.
C.
The difference between the actual variable overhead rate and the standard variable overhead rate, multiplied by actual hours.
D.
The over or under-absorption of fixed overheads due to changes in production volume.
How to approach this question
Efficiency relates to time (hours). Variable overhead efficiency is essentially the labor/machine efficiency variance multiplied by the variable overhead rate.
Full Answer
B.The difference between the standard hours allowed for actual production and the actual hours worked, valued at the standard variable overhead rate.✓ Correct
Variable overheads are typically absorbed based on labor or machine hours. Therefore, if workers or machines are inefficient and take longer than standard (Actual Hours > Standard Hours), extra variable overheads are incurred. The variable overhead efficiency variance calculates this impact: (Standard Hours for Actual Production - Actual Hours) × Standard Variable Overhead Rate.
Common mistakes
Confusing variable overhead efficiency variance with variable overhead expenditure variance (Option C).
Practice the full ACCA MA — Management Accounting Practice Exam 6
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