A company uses a standard costing system. The production budget for year 1 was based on 200,000 units of output. Each unit requires two standard hours of manufacturing labor for completion. Total overhead was budgeted at $900,000 for the year, and the budgeted fixed overhead rate was $1.50 per direct manufacturing labor hour. Both variable and fixed overheads are allocated to the product based on direct manufacturing labor hours. The actual data for year 1 are as follows:. Actual production in units198,000
Actual direct manufacturing labour hours425,000
Actual variable overhead$352,000
Actual fixed overhead$575,000
What is the amount of unfavorable variable overhead efficiency variance ?
Variable overhead variance
Here we calculate the variable overhead efficiency variance based on direct labor hours.