Majer Corporation makes a product with the following standard costs:
| Standard Quantity or Hours | Standard Price or Rate | Standard Cost Per Unit | |
| Direct materials | 6.2 ounces | $5.00 per ounce | $31.00 |
| Direct labor | 0.6 hours | $11.00 per hour | $6.60 |
| Variable overhead | 0.6 hours | $5.00 per hour | $3.00 |
The company reported the following results concerning this product in February.
| Originally budgeted output | 5,500 units |
|---|---|
| Actual output | 5,600 units |
| Raw materials used in production | 33,000 ounces |
| Actual direct labor-hours | 2,020 hours |
| Purchases of raw materials | 35,400 ounces |
| Actual price of raw materials | $7.10 per ounce |
| Actual direct labor rate | $2.40 per hour |
| Actual variable overhead rate | $5.20 per hour |
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 February is:
Variable overhead efficiency variance
= (SLH - ALH) * SVOHR
= (5600*0.6 - 2020) * 5
= (3360 - 2020) * 5
= 6,700 Favourable
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