Skillful Ltd Budgeted $900,000 for Total Overhead

Skillful Ltd budgeted $900,000 for total overhead. The standard variable overhead rate was $1 per direct labour hour, or $3 per unit, based on an anticipated activity level of 300,000 direct labour hours. During the year 110,000 units were produced. Fixed overhead costs incurred were $590,000. The variable overhead budget variance was $5,500 unfavourable, and the actual variable overhead rate was $1.10 per direct labour hour. The variable overhead efficiency variance was:

A) $25,000 F
B) $25,000 U
C) $30,500 F
D) $5,500 F

Correct Answer:

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