Question

Budgeted variable overhead for the year is $150,000. Expected activity is 30,000 standard direct labor hours. The actual hours worked were 15,000 and the standard hours allowed for actual production were 18,000. The variable overhead efficiency variance is:

Answer 1

Answer:

-$15,000 favorable variance

Explanation:

variable overhead efficiency variance = standard overhead rate x (actual hours - standard hours)

• standard variable overhead rate = $150,000 / 30,000 = $5
• actual hours 15,000
• standard hours 18,000

variable overhead efficiency variance = $5 x (15,000 - 18,000) = $5 x (-3,000) = -$15,000 favorable variance