Question

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours.
Standard hours per unit of output 5.20 DLHs
Standard variable overhead rate $ 11.65 per DLH

The following data pertain to operations for the last month:



Actual direct labor-hours 8,700 DLHs
Actual total variable manufacturing overhead cost $ 95,990
Actual output 1,600 units

What is the variable overhead efficiency variance for the month?

Answer 1

The variable overhead efficiency variance for the month is $4,427.

What is variable overhead efficiency variance?

The variable overhead efficiency variance shows the difference between the actual and budgeted hours worked, multiplied by the standard variable overhead rate per hour.

The formula for computing the variable overhead efficiency variance is as follows:

Variable overhead efficiency variance = Standard overhead rate x (Actual hours - Standard hours)

Data and Calculations:

Standard hours per unit of output = 5.20 DLHs

Standard variable overhead rate = $11.65 per DLH

Basis of variable manufacturing overhead = direct labor-hours

Actual direct labor-hours = 8,700 DLHs

The actual total variable manufacturing overhead cost = $95,990

Actual output = 1,600 units

Budgeted standard direct labor-hours = 8,320 DLHs (5.20 x 1,600)

Variable Overhead Efficiency Variance = Standard overhead rate x (Actual hours - Standard hours)

= $11.65 x (8,700 - 8,320)

= $4,427

Thus, the variable overhead efficiency variance for the month is $4,427.

Learn more about computing efficiency variances at brainly.com/question/24316732

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