Variable Overhead Efficiency Variance
|
Budget for December 2003;
|
Shs.
|
|
Fixed Overheads
|
11,480
|
|
Variable Overheads
|
13,120
|
|
Labour Hours
|
3,280 hours
|
|
Standard Hours of Production
|
3,280 hours
|
|
Actual Results for December 2003
|
Shs.
|
|
Fixed Overheads
|
12,100
|
|
Variable Overheads
|
13,930
|
|
Actual Labour Hours
|
3,150/hours
|
|
Standard Hours of Production
|
3,280 hours
|
Variable Overhead Efficiency Variance = (actual labour hours x V.O.A.R) - (standard hour of production x V.O.A.R)
= (3,150 x 4) - (3,230 x 4)
= Shs.12,600 - Shs.12,920
= Shs.320 Favourable
The variance is favourable since we spent less than the standard cost.