Question

Variable Overhead Spending and Efficiency Variances, Columnar and Formula Approaches Rath Company provided the following information:

Standard variable overhead rate (SVOR) per direct labor hour $3.75
Actual variable overhead costs $222,816
Actual direct labor hours worked (AH) 57,200
Actual production in units 15,000
Standard hours (SH) allowed for actual units produced 60,000

Required:
Using the columnar approach, calculate the variable overhead spending and efficiency variances.

Answer 1

Answer and Explanation:

The computation of the variable overhead spending and efficiency variances is given below:

Actual VOH                AH ×SVOR            SH × SVOR

222816            57200 × 3.75 = 214500    60000 × 3.75 = 225000

             8316                                     10500

Hence, 8316 is unfavorable

And, 10,500 should be favorable