# Question & Answer: A company has determined that the standard for labor is 2 direct labor hours per unit produced. The variable overhead ap…..

A company has determined that the standard for labor is 2 direct labor hours per unit produced. The variable overhead application rate is \$1 per direct labor hour. If the company produces 1000 units with 1930 direct labor hours and the actual variable overhead is \$2200, what is the variable overhead efficiency variance? A) \$70 favorable B) \$70 unfavorable C) \$80 favorable D) \$80 unfavorable.

A.\$70 favorable.

first ,we shall calcualate the standard hours for acutal output.

=> units produced * standard labour hours per unit

=>1000 units * 2 hours =>2,000 hours.

now,

variable overhead efficiency variance = [(standard hours)* (standard variable overhead rate per hour)] – [(acutal hours ) *(standard variable overhead per hour)]

=>(2,000) hours * (\$1) – (1930 hours)*(\$1) =>\$2000 – \$1930 =>\$70 favourable…..(since actual is less than standard it is a favorable variance).