Question

Variable Overhead Spending and Efficiency Variances, Columnar and Formula Approaches Aretha Company provided the following information: Standard variable overhead rate (SVOR) per direct labor hour $4.70 Actual variable overhead costs $335,750 Actual direct labor hours worked (AH) 69,200 Actual production in units 14,000 Standard hours (SH) allowed for actual units produced 70,000 Required: 1. Using the columnar approach, calculate the variable overhead spending and efficiency variances. Enter amounts as positive numbers and select Favorable (F) or Unfavorable (U).

Answer 1

Variable overhead spending variance $10,380 U

Variable efficiency variances $ 3,760.00 F

Total variable overhead variance $ 6,620.00 U

Step-by-step explanation:

1. Calculation for the variable overhead spending and efficiency variances

AH * AH

69,200*4.85=335,620.00

AH* SR

69,200 * 4.7=325,240.00

SH * SR

70,000*4.7= 329,000.00

Hence, the variable overhead spending will be:

AH * AH- AH* SR

=335,620.00-325,240.00= $10,380 U

The efficiency variances will be:

AH* SR- SH * SR =325,240.00- $329,000.00 =$ 3,760.00 F

2.Calculation for the variable overhead spending variance.

Using this formula

Variable overhead efficiency variance = SR × (AH – SH)

Let plug in the formula

SR = Standard variable manufacturing overhead rate = $4.70

AH = Actual hours worked during the period = 69,200

SH = Standard hours allowed for actual output or production = 70,000

Variable overhead efficiency variance = SR × (AH – SH) = 4.70 (69,200 -70000)

= 4.70* 800 =3,760.00 F

3.

Using this formula

Variable Overhead Spending variance = (Actual Rate * Actual Hour - Standard Rate * Actual Hour )

= AH (AR - SR)

Let plug in the formula

AR = 33,5750/69200

= $ 4.8

AH = Actual hours worked during the period = 69,200

SR = Standard variable manufacturing overhead rate = $4.70

Variable overhead spending variance = 69200 ( 4.85 - 4.70)

$ 10,380.00 U

4. Calculation for total variable overhead variance

Using this formula

Total Variable Overhead variance = (Actual Hour * Actual Rate - Standard Hour * Standard Rate)

Let plug in the formula

AH = Actual hours worked during the period = 69,200

SH = Standard hours allowed for actual output or production = 70,000

AR = 335750/69200 = $ 4.85

SR = Standard variable manufacturing overhead rate = $4.70

Total Variable Overhead variance = (69200*4.85) - (70000*4.7)

=$ 6,620.00 U