Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead efficiency variance. $\begin{array}{lrl}
\text { Direct labor standard (2 hrs. @ } \$ 12.75 / \mathrm{hr} .) & \$ 25.50& \text { per finished unit} \
\text { Actual direct labor hours } & 81,500& \text { hrs.} \
\text { Budgeted units } & 42,000& \text { units} \
\text { Actual finished units produced } & 40,000 & \text { units}\
\text { Standard variable OH rate }(2 \mathrm{hrs} . @ \$ 14.30 / \mathrm{hr} .) & \$ 28.60& \text { per finished unit} \
\text { Standard fixed OH rate }(\$ 336,000 / 42,000 \text { units) } & \$ 8.00 & \text { per unit}\
\text { Actual cost of variable overhead costs incurred } & \$ 1,140,000 \
\text { Actual cost of fixed overhead costs incurred } & \$ 338,000
\end{array}$

Question

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead efficiency variance. $\begin{array}{lrl}
\text { Direct labor standard (2 hrs. @ } \$ 12.75 / \mathrm{hr} .) & \$  25.50&  \text { per finished unit} \
\text { Actual direct labor hours } &  81,500&  \text {  hrs.} \
\text { Budgeted units } & 42,000&  \text { units} \
\text { Actual finished units produced } &  40,000 &  \text { units}\
\text { Standard variable OH rate }(2 \mathrm{hrs} . @ \$ 14.30 / \mathrm{hr} .) & \$  28.60& \text { per finished unit} \
\text { Standard fixed OH rate }(\$ 336,000 / 42,000 \text { units) } & \$  8.00 &  \text { per unit}\
\text { Actual cost of variable overhead costs incurred } & \$ 1,140,000 \
\text { Actual cost of fixed overhead costs incurred } & \$ 338,000
\end{array}$

Quizplus · Accepted Answer

The variable overhead efficiency variance is calculated as (Actual hours - Standard hours allowed) x Standard variable overhead rate. Standard hours allowed = 40,000 units x 2 hours/unit = 80,000 hours. Variance = (81,500 - 80,000) x $14.30 = $21,450 unfavorable.

Fletcher Company Collected the Following Data Regarding Production of One