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		8.6	hours
Standard variable overhead rate	$	15.00	per hour

The following data pertain to operations for the last month:

Actual hours		2,925	hours
Actual total variable manufacturing overhead cost	$	44,635
Actual output		200	units

What is the variable overhead efficiency variance for the month?

Answer 1

• Variable OH efficiency variance = $ 18075 U
• Working

Variable Overhead Efficiency Variance
(	Standard Hours = 200 units x 8.6 hrs	-	Actual Hours	)	x	Standard Rate
(	1720	-	2925	)	x	$                        15.00
	-18075
	Variance		$            18,075.00			Unfavourable-U