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Hi sir
How do you work this out?Thanks.A manufacturing company operates a standard absorption costing system.
Last month they budgeted on using 30000 production hours and on a total fixed production overhead cost of $180000.
The actual hours worked last month were 28000 and the standard hours for the actual production were 31000.
What was the fixed overhead efficiency variance for last month?The standard cost is 180,000/30,000 = $6 per hour.
They actually worked 28,000 hours and were expected to work 31,000 hours for the actual production, so they were 3,000 hours faster.
Therefore the efficiency variance = 3,000 x $6 = $18,000 (favourable).
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