In January the company’s budgeted production was 7,400 units but the actual production
was 7,500 units. The company used 45,580 kilos of the direct material and 2,030 direct
labor-hours to produce this output. During the month, the company purchased 48,500 kilos
of the direct material at a cost of $53,350. The actual direct labor cost was $18,473 and
the actual variable overhead cost was $7,714.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The variable overhead efficiency variance for January is: