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15 January, 18:19

Novelli Corporation makes a product whose variable overhead standards are based on direct labor-hours. The quantity standard is 1.5 hours per unit. The variable overhead rate standard is $11.50 per hour. In September, the company produced 1,400 units using 2,090 direct labor-hours. The actual variable overhead rate was $12.90 per hour. The variable overhead efficiency variance for September is:

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  1. 15 January, 21:03
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    variable overhead efficiency variance = $115 favorable

    Explanation:

    Giving the following information:

    The quantity standard is 1.5 hours per unit.

    The variable overhead rate standard is $11.50 per hour.

    In September, the company produced 1,400 units using 2,090 direct labor-hours.

    To calculate the variable overhead efficiency variance, we need to use the following formula:

    variable overhead efficiency variance = (Standard Quantity - Actual Quantity) * Standard rate

    Standard quantity = 1.5*1,400 = 2,100 hours

    variable overhead efficiency variance = (2,100 - 2,090) * 11.5

    variable overhead efficiency variance = $115 favorable
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