The Litton Company has established standards as follows:
Direct material 3 lbs. @ $4/lb. = $12 per unit
Direct labor 2 hrs. @ $8/hr. = $16 per unit
Variable manuf. Overhead 2 hrs. @ $5/hr. = $10 per unit
Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.
Units produced 600
Direct material used 2,000 lbs.
Direct material purchased (3,000 lbs.) $11,400
Direct labor cost (1,100 hrs.) $9,240
Variable manuf. overhead cost incurred $5,720
The company applies variable manufacturing overhead to products on the basis of direct labor hours.
The variable overhead efficiency variance is:
A) $520 F. C) $500 U.
B) $520 U. D) $500 F.