Question

Davis Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for September when Davis produced 5,000 units: Standard: DLH per unit 3.00 Variable overhead per DLH $1.80 Fixed overhead per DLH $3.25 Budgeted variable overhead $27,250 Budgeted fixed overhead $49,500 Actual: Direct labor hours 16,000 Variable overhead $31,325 Fixed overhead $49,750 Refer to Davis Company. Using the four-variance approach, what is the variable overhead efficiency variance

Answer 1

$1,800

Step-by-step explanation:

Calculation to determine the variable overhead efficiency variance

Using this formula

VOH Efficiency Variance = Budgeted VOH based on Actual - Budgeted VOH/Standard Qty

Let plug in the formula

VOH Efficiency Variance = ((16,000 * $1.80/hr) - ((5,000 * 3.00hrs/unit * $1.80/hr))

VOH Efficiency Variance = $(28,800.00 - $27,000.00)

VOH Efficiency Variance = $1.800

Therefore Using the four-variance approach, what is the variable overhead efficiency variance will be $1,800