Juhasz Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or Hours Standard Price or Rate Direct labor 0.50 hours $ 21.00 per hour Variable overhead 0.50 hours $ 4.10 per hour In August the company produced 8,000 units using 4,190 direct labor-hours. The actual variable overhead cost was $15,922. The company applies variable overhead on the basis of direct labor-hours. The variable overhead efficiency variance for August is:

variable overhead efficiency variance= $779 unfavorable

Explanation:

Giving the following information:

Variable overhead 0.50 hours $ 4.10 per hour

The company produced 8,000 units using 4,190 direct labor-hours. The actual variable overhead cost was $15,922.

To calculate the variable overhead efficiency variance, we need to use the following formula:

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

Standard quantity= 0.5*8,000= 4,000

variable overhead efficiency variance= (4,000 - 4,190)*4.1

variable overhead efficiency variance= $779 unfavorable

Efficiency variance in $779  unfavorable

Explanation:

Variable overhead efficiency variance: Variable overhead efficiency variance aims to determine whether or not their exist savings or extra cost incurred on variable overhead as a result of workers being faster or slower that expected.

Since the variable overhead is charged using labour hours, any amount by which the actual labour hours differ from the standard allowable hours would result in a variance  

                                                                                                          $

8,000 units should have taken (8,000 × 0.50)                          4,000

but did take                                                                                   4,190

Efficiency variance in (hours)                                                       1,90 unfavorable

Standard rate per hour                                                           × $4.10

Efficiency variance in ($)                                                            $779  unfavorable

Efficiency variance in $779  unfavorable

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