Juhasz Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or HoursStandard Price or Rate Direct labor 0.40hours$29.00per hour Variable overhead 0.40hours$4.90per hour In August the company produced 8,800 units using 3,700 direct labor-hours. The actual variable overhead cost was $17,020. The company applies variable overhead on the basis of direct labor-hours. The variable overhead efficiency variance for August is:

-882

Explanation:

A variable overhead efficiency variance is simply defined as the actual labor hours less the budgeted labor hours which is then multiplied by the hourly rate for the standard variable overhead. It should be note that the standard variable overhead consist of the indirect labor costs like the security and the shop foreman.

Bases on the explanation above, the variable overhead efficiency will be:

= [(8800 × 0.40) - 3700] × 4.90

= -882

This is an unfavorable variance which means that the number of actual hours worked is more than the budgeted hours.

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