Bondi Corporation makes automotive engines. For the most recent month, budgeted production was 1,500 engines. The standard power cost is $3.10 per machine-hour. The company's standards indicate that each engine requires 9.3 machine-hours. Actual production was 1,800 engines. Actual machine-hours were 15,860 machine-hours. Actual power cost totaled $51,593.Required:Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable.

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Breshay Walton · Accepted Answer

Final Answer : Variable overhead rate variance = (Actual hours × Actual rate) − (Actual hours × Standard rate)= $51,593 − (15,860 hours × $3.10 per hour)= $51,593 − $49,166= $2,427 UnfavorableStandard machine-hours allowed for the actual output = 9.3 hours per unit × 1,800 units = 16,740 hoursVariable overhead efficiency variance = (Actual hours − Standard hours) × Standard rate= (15,860 hours − 16,740 hours) × $3.10 per hour= (−880 hours) × $3.10 per hour= $2,728 Favorable

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