• Variable Overhead Variance (applied based on labor hours) - Appendix E5

  • VO/H Rate (Spending) Variance - An unfavorable variance means we used less or spent less on the items that show up on the variable overhead schedule. Analyze the difference between the variances between quarter 1 and quarter 2.

  • VO/H Efficiency Variance - The variance relies on what the VO/H is applied by. In this case, the efficiency variance is the same as the direct labor efficiency variance. It says nothing about the Variable Overhead Costs. The unfavorable variance is due to the inefficiency in direct labor hours Analyze the difference between the variances between quarter 1 and quarter 2.

Appendix E-5 Water Play, Inc. Variable Overhead Variances Quarters 1 and 2 Quarter 1 Actual Quantity X Actual Rate (AQ X VO/H Rate AR) (Spending) Variance 1,049,760 AQ $ 55.37 SR Actual Quantity X Standard Rate (AQ X SR) 1,049,760 $ 53.24 VO/H Efficiency Variance Standard Quantity Allowed X Actual Output X Standard Rate (SQA X AO X SR) 90 10,800 $ 53.24 51,750,000 AQ AR SQA AO SR 58,125,600 55,890,000 2,235,600U 4.3% 4,140,000 U 8.0% Quarter 2 Actual Quantity X Actual Rate (AQ X AR) 1,523,610 $ 54.31 Actual Quantity X Standard Rate (AQ X SR) 1,523,610 $ 53.24 VO/H Rate (Spending) Variance AQ SR VO/H Efficiency Variance Standard Quantity Allowed X Actual Output X Standard Rate (SQA X AO X SR) 90 16,200 $ 53.24 77,625,000 AQ AR SQA AO SR 82,740,488 81,118,125 1,622,363 U 2.0% 3,493,125 U 4.5%