The following information is available for Harrison’s Hot Dogs: Actual production 12,320 packages, Budgeted production 12,500 packages, Standard direct labor hours 1.5 direct labor hours per package, actual direct labor hours 19,500, Standard variable overhead rate $3 per direct labor hour, Actual variable overhead costs $50,000. Calculate the variable overhead spending and efficiency variances.

$3,060 Unfavorable

Explanation:

Variable overhead efficiency variance is the difference between the actual time taken to achieve a given production output less the standard hours for same multiplied by the standard variable overhead rate

Variable overhead efficiency variance is determined as follows:

                                                                                                Hours

12,320 packages should have taken (12,320 × 1.5 )           18,480.

but did take                                                                           19,500

Efficiency variance ( in hours  )                                             1,020 Unfav.

× standard variable OH rate                                                 × $3

Variable overhead efficiency variance ($)                       $3,060 Unfavourable

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