Variable Overhead variances: Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories: Variable overhead rate variance: The variable overhead rate variance is calculated with the help of following formula: V a r i a b l e o v e r h e a d r a t e v a r i a n c e = ( A c t u a l V a r i a b l e o v e r h e a d r a t e – S t a n d a r d v a r i a b l e o v e r h e a d r a t e ) × A c t u a l h o u r s Variable overhead efficiency variance: The variable overhead efficiency variance is calculated with the help of following formula: V a r i a b l e o v e r h e a d e f f i c i e n c y v a r i a n c e = ( A c t u a l H o u r s – S t a n d a r d h o u r s ) × S t a n d a r d V a r i a b l e o v e r h e a d r a t e To calculate: Variable Overhead rate, efficiency, and spending variances

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Chapter 9, Problem 1.3GAP

To determine

Concept introduction:

Variable Overhead variances:

Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories:

Variable overhead rate variance: The variable overhead rate variance is calculated with the help of following formula: Variable overhead rate variance = ( Actual Variable overhead rate – Standard variable overhead rate ) ×Actual hours

Variable overhead efficiency variance: The variable overhead efficiency variance is calculated with the help of following formula:

Variable overhead efficiency variance = (Actual Hours –Standard hours ) ×Standard Variable overhead rate

To calculate:

Variable Overhead rate, efficiency, and spending variances

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