Variable overhead Variance Variable overhead Cost variance standard cost for actual production - actual cost incurred Variable overhead expenditure variance actual cost incurred - (actual hour worked x standard rate per hour) Variable overhead efficiency variance standard rate per hour (actual hours worked - standard hour for actual production) Problem 41 Budgeted hours standard time per unit x budgeted output = 2 hours x 2000 - 4000 hours Standard hours for actual production standard time per unit x actual production = 2 hours x 1800 = 3600 hours Standard rate per hour = budgeted overhead / budgeted hours - 26000/4000 = Rs.1.5 Standard cost for actual production-hr - Standard rate per hour x Standard hours for actual production = 31.50 X 3600 = 25400 Variable overhead Cost variance standard cost for actual production - actual cost incurred = 5400-5360 = 40(F) Variable overhead expenditure variance actual cost incurred - actual hour worked x standard rate per hour) = 5360 - (3400 x 1.50) =260 (A) Variable overhead efficiency variance = standard rate per hour (actual hours worked - standard hour for actual production) = 1.50 (3400 - 3600) = 300 (F) Check Variable overhead Cost variance - Variable overhead expenditure variance + Variable overhead efficiency variance 40(F) - 260 (A) + 300 (F)