EXERCISE 10-4 (20 MINUTES)

2,300 hours × $3.25 per hour $3.25 per hour 2,400 hours × $3.20 per hour* 2,300 hours × = $7,360 = $7,475 = $7,800 ↑ ↑ ↑Variable Overhead Variable Overhead Spending Variance, Efficiency Variance, $115 F $325 F Total Variance, $440 F *$7,360 ÷ 2,300 hours =$3.20 per hour Alternatively, the variances can be computed using the formulas: Variable overhead spending variance: AH(AR – SR) = 2,300 hours ($3.20 per hour – $3.25 per hour) = $115 F Variable overhead efficiency variance: SR(AH – SH) = $3.25 per hour (2,300 hours – 2,400 hours) = $325 F