Variable Overhead Efficiency Variance Formula

Variable Overhead Efficiency Variance Formula

Variable overheads efficiency variance can be calculated by the following formula. Variable overhead efficiency variance may be favorable or adverse.

Variable overhead efficiency = Standard Rate x (Standard Hr-Actual Hr)

Example

Standard rate = $ 10

Standard Hr = 8 Hr per unit

Unit produced= 10,000

Actual Hr = 70,000

Solution

Standard hour = units produced x Hr taken per unit

= 10,000 x 8

=80,000 Hr

Variable overhead efficiency = Standard Rate x (Standard Hr-Actual Hr)

= 10 x (70,000-80,000)

= 10 x -10,000

=-100,000 (adverse Variable overhead efficiency variance).