Question

The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 6.0 hours Standard variable overhead rate $ 12.40 per hour The following data pertain to operations for the last month: Actual hours 2,600 hours Actual total variable manufacturing overhead cost $ 32,870 Actual output 250 units What is the variable overhead efficiency variance for the month?

Answer 1

Answer:

$13,640 Unfavorable

Explanation:

Data provided

Actual hours = 2,600

Standard hours = 6.0

Standard variable overhead rate = $12.40

The computation of variable overhead efficiency variance is shown below:-

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

= (2,600 - (250 × 6.0)) × $12.40

= (2,600 - 1,500) × $12.40

= 1,100 × $12.40

= $13,640 Unfavorable

Therefore for computing variable overhead efficiency variance we simply applied the above formula.