QUESTION6 The following standards for variable one product o

QUESTION6 The following standards for variable one product overlh facturing overhead have been established for a company that makes only Standard hours per unit of output..- 1.2 hours Standard variable overhead rate.... $10.20 per frour The following data pertain to operations for the last month Actual hours.. Actual total variable overhead cos.. $$2.750 Actual output 5,000 hours 4,000 units What is the variable overhead efficiency variance for the month? O $1,680 F O $2,040 U O $2,110 U O $3,790 U QUESTION7 Which cost is not relevant in making financial decisions? O Sunk costs. Opportunity costs. Incremental costs. ) All three are relevant.

Solution

Question 6

Variable Overhead Efficiency Variance

Standard Hours Allowed for actual production:

Actual Production

4,000

Units

x Allowed Standard Hours Per Unit

1.2

Hours

Total Standard Hours Allowed for actual production (SHAP)

4800

Hours

Actual Hours Worked (AH)

5000

Hours

Variance or Difference in Hours

200

hours

x Standard Hourly Variable Overhead Rate

$10.20

per hour

Variable Overhead Efficiency Variance

$2,040

Unfavorable

The correct option is $2,040 U.

Here the Actual Hours worked is higher than anticipated hours to be worked to get actual production units, hence the variance is Unfavorable.

Question 7

The correct option is Sunk Cost.

Sunk Cost is the cost which has already been incurred in the past and does not have any impact on the decision making. Sunk costs are irrelevant.

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Standard Hours Allowed for actual production:
Actual Production	4,000	Units
x Allowed Standard Hours Per Unit	1.2	Hours
Total Standard Hours Allowed for actual production (SHAP)	4800	Hours
Actual Hours Worked (AH)	5000	Hours
Variance or Difference in Hours	200	hours
x Standard Hourly Variable Overhead Rate	$10.20	per hour
Variable Overhead Efficiency Variance	$2,040	Unfavorable