Shawl Corporation's variable overhead is applied on the basis of direct labor-hours. The standard cost card for product F02E specifies 5.5 direct labor-hours per unit of F02E. The standard variable overhead rate is $6.80 per direct labor-hour. During the most recent month, 1,560 units of product F02E were made, and 8,700 direct labor-hours were worked.

The actual variable overhead incurred was $52,635.

Required:

a. What was the variable overhead rate variance for the month?
b. What was the variable overhead efficiency variance for the month?

(a) $6,525 (b) $816

Explanation:

Solution

Given that:

(a) The variable overhead rate variance for the month:

The variable overhead rate variance = (Actual rate  - Standard rate) * Actual hours

=(($52,635/8700) -$6.80)* 8,700 hours

=($6.05-$6.80) * 8,700 hours

= $6,525 Favorable

(b) The variable overhead efficiency variance for the month:

The variable overhead efficiency variance = (Actual hours - Standard hours) * Standard rate

= (8,700 Hours -(1,560 units * 5.5  Hours/Unit)) * $ 6.80

= (8,700 Hours- 8,580 Hours) * $6.80

= $816 Which is unfavorable

the law, public safety, corrections, and security cluster prepares people for careers in planning, managing, and providing legal, public safety, protective services and homeland security, including professional and technical support services.