A company has determined that the standard rate for labor is

A company has determined that the standard rate for labor is 2 direct labor hours per init produced. The variable overhead application rate is $1 per direct labor hour. If the company produces 1000 units with 1910 diret labor hours and the actual variable overhead is $2200, what is the variable overhead efficiency variance?

A. $90 Favorable

B. $90 Unfavorable

C. $100 Favorable

D. $100 Unfavorable

Solution

A. $90 Favourable

Formula for variable overhead efficiancy variance = Standard overhead rate x (Actual hours - Standard hours)

= 1(1910-2000)

= 90 favourable