Question

In a company's standard costing system direct labor-hours are used as the base for applying variable manufacturing overhead costs. The standard direct labor rate is twice the variable overhead rate. Last period the labor efficiency variance was unfavorable. From this information one can conclude that last period the variable overhead efficiency variance was:

Answer 1

Answer:

Unfavourable and half the labour efficiency variance.

Explanation:

From the above, variable overhead efficiency variance would be favorable if actual hours worked are less than the standard hours allowed and unfavorable if actual hours worked are more than the standard hours allowed for actual output or production during the period.

In the other hand, variable overhead efficiency variance is the difference between actual hours worked at standard rate and standard hours allowed at standard rate. The standard hours allowed means standard hours allowed for actual output or production during a particular period.