Chapter 9, Problem 5.3GBP

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:

1. Variable overhead rate variance:The variable overhead rate variance is calculated with the help of the following formula: $\begin{array}{l} \hfill \\ \begin{array}{l}Variableoverheadratevariance=\\ \left(ActualVariableoverheadrate–Standardvariableoverheadrate\right)\times Actualhours\end{array}\hfill \end{array}$
2. Variable overhead efficiency variance:The variable overhead efficiency variance is calculated with the help of the following formula:

$\begin{array}{l}Variableoverheadefficiencyvariance=\\ \left(ActualHours–Standardhours\right)\times StandardVariableoverheadrate\end{array}$

To calculate:

Variable Overhead rate, efficiency, and spending variances.