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Exercise 10-4 (continued)
3.
Actual Hours of
Input, at the
Actual Rate
Actual Hours of Input,
at the Standard Rate
Standard Hours
Allowed for Output, at
the Standard Rate
(AH × AR)
(AH × SR)
(SH × SR)
5,750 hours ×
$4.00 per hour
6,000 hours ×
$4.00 per hour
$21,850
= $23,000
= $24,000
Rate Variance,
$1,150 F
Efficiency Variance,
$1,000 F
Spending Variance,
$2,150 F
Alternatively, the variances can be computed using the formulas:
Variable overhead rate variance = AH (AR – SR)
5,750 hours ($3.80 per hour* – $4.00 per hour) = $1,150 F
*$21,850 ÷ 5,750 hours = $3.80 per hour
Variable overhead efficiency variance = SR (AH – SH)
$4.00 per hour (5,750 hours – 6,000 hours) = $1,000 F
