Budgeted variable overhead for the year was $130,000. Expected activity was 20,000 standard direct labour hours. The actual hours worked were 18,250, and the standard hours allowed for actual production were 19,750. What was the variable overhead efficiency variance?
A) $0
B) $1,500 F
C) $9,750 F
D) $12,000 F

Question

Quizplus · Accepted Answer

Variable overhead efficiency variance = (standard hours allowed - actual hours worked) x variable overhead rate per hour.
Variable overhead rate per hour = budgeted variable overhead / expected activity
Variable overhead rate per hour = $130,000 / 20,000 = $6.50
Variable overhead efficiency variance = (19,750 - 18,250) x $6.50
Variable overhead efficiency variance = $9,750 F.

Budgeted Variable Overhead for the Year Was $130,000