Question

Pace Company has the following standards related to variable
overhead for its single product:

                     standard hours       standard rate
variable overhead    3 hours per unit     $12.64 per hour

During May, Pace Company paid its direct labor workers $644,000
and incurred variable overhead cost totaling $520,000. 14,000
units were produced during May and the direct labor workers
were paid a rate of $16.10 per hour.

Calculate the variable overhead efficiency variance for May.
If the variance is favorable, place a minus sign in front of
your answer (i.e., -5000). If the variance is unfavorable,
enter your answer as a number (i.e., 5000).

Answer 1

Variable overhead efficiency variance = $122,631.55 Favorable or 122,632 or 122,633

Working

Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	42000	-	32298	)	x	$           12.64
	$       122,631.55
	Variance		$           122,631.55			Favourable-F

.

Standard DATA for		14000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Variable Overhead	( 3 Hour x 14000 Units)=42000 Hour	$                12.64	$          530,880.00

.

Actual DATA for		14000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Variable Overhead	32,298*	$         16.10	$       520,000.00

*520000/16.10