{"id":118,"date":"2021-01-26T22:09:22","date_gmt":"2021-01-26T22:09:22","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/?post_type=chapter&#038;p=118"},"modified":"2021-05-13T00:09:38","modified_gmt":"2021-05-13T00:09:38","slug":"variable-manufacturing-overhead-efficiency-variance","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/chapter\/variable-manufacturing-overhead-efficiency-variance\/","title":{"raw":"Variable Overhead Efficiency Variance","rendered":"Variable Overhead Efficiency Variance"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Compute the variable overhead efficiency variance<\/li>\r\n<\/ul>\r\n<\/div>\r\nAs a formula, the <strong>Variable Overhead Efficiency Variance<\/strong> is similar to the direct materials efficiency variance and the direct labor efficiency variance. We use the actual quantity of the cost driver for Actual Quantity (AQ) and the expected quantify for the Standard Quantity (SQ), and the burden rate for Standard Cost (SC):\r\n\r\nVariable Overhead Efficiency Variance = <strong>(AQ \u2013 SQ) x SC<\/strong>\r\n\r\n<img class=\"size-medium wp-image-681 alignright\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/11200301\/3.1.3-Guitar-200x300.jpg\" alt=\"A picture of a guitar\" width=\"200\" height=\"300\" \/>Alternatively, the Variable Overhead Efficiency Variance could be calculated by multiplying Actual Quantity (AQ) by the Standard Cost (SC) which would give the total variable overhead without regard to the expected rate, and from that, subtracting from it the product of the Standard Quantity (SQ) multiplied by the Standard Cost (SC) which would give the total expected variable overhead if we\u2019d predicted it accurately. By using standard cost against both the actual and expected quantity, we get the variance in dollars that is attributed to quantity only.\r\n\r\n<strong>(AQ x SC) \u2013 (SQ x SC)<\/strong>\r\n\r\nBoulevard Blanks has decided to allocate overhead based on direct labor hours (DLH).\u00a0 The standard variable OH rate per DLH is $0.80 (calculated previously) and the actual variable overhead for the month was $1,395 for 2,325 actual direct labor hours giving an actual rate of $0.60.\r\n\r\nIt took our workers 2,325 hours to do what we expected them to do in 2,430 hours. Let\u2019s do the calculation:\r\n\r\n<strong>(AQ \u2013 SQ) x SC<\/strong>\r\n\r\n(2,325 - 2,430) x $0.80 = -105 x $0.80 = -$84.00\r\n\r\nAlternatively:\r\n\r\n(AQ * SC) - (SQ * SC) = (2,325 * $0.80) - (2,430 * $0.80) = $1,860 - $1,944 = -$84.00\r\n\r\nEven though the answer is a negative number, the variance is favorable because we used less indirect materials than we budgeted.\r\n\r\nLet\u2019s look at the two variances together:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<thead>\r\n<tr class=\"u-sr-only\">\r\n<th scope=\"col\"><\/th>\r\n<th scope=\"col\">Description<\/th>\r\n<th scope=\"col\">Amount<\/th>\r\n<th scope=\"col\">Favorable or Unfavorable<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td><\/td>\r\n<td>Variable Overhead Cost Variance<\/td>\r\n<td class=\"r\">$(465.00)<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td>Variable Overhead Efficiency Variance<\/td>\r\n<td class=\"r\">(84.00)<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 $ (549.00)<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"highlight-green\">Favorable<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nAnd relate them back to the budget v. actual report:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\"><caption>Boulevard Blanks\r\nPartial Income Statement\r\nFor the month ended July 31, 20XX<\/caption>\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Actual<\/th>\r\n<th class=\"r\" scope=\"col\">Budget<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td>Sales revenue<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 178,200.00<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 178,200.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Variable manufacturing costs<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Direct materials<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 38,080.00<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 38,880.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Direct Labor<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 46,500.00<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 43,740.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Allocated overhead<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,395.00<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,944.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Fixed manufacturing costs<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Allocated overhead<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 13,485.00<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 13,365.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost of Goods Manufactured and sold<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 99,460.00<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 97,929.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Gross Profit<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 78,740.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 80,271.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nWe can double-check our work by reconciling the two variances to the overall variance in the budget:\r\n(actual quantity x actual cost) - (standard quantity x standard cost)\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\">AQ<\/th>\r\n<th class=\"r\" scope=\"col\">AP<\/th>\r\n<th class=\"r\" scope=\"col\">SQ<\/th>\r\n<th class=\"r\" scope=\"col\">SC<\/th>\r\n<th class=\"r\" scope=\"col\">TOTAL VAR<\/th>\r\n<th class=\"r\" scope=\"col\"><span class=\"u-sr-only\">Favorable or Unfavorable<\/span><\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td class=\"r\">\u00a0 \u00a0 2,325.00<\/td>\r\n<td class=\"r\">$\u00a00.60<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r highlight\">$ 1,395.00<\/td>\r\n<td>Actual indirect variable costs<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r\">\u00a0 \u00a0 2,430.00<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 0.80<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 1,944.00<\/td>\r\n<td>Budgeted indirect variable costs<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td>Variance<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 $(549.00)<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"highlight-green\">Favorable<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nAgain, in reporting to our internal users, we would omit the parenthesis that we use in accounting to show a negative amount, since that may confuse non-financial managers who are relying on the report. We would show the variances as follows:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<thead>\r\n<tr class=\"u-sr-only\">\r\n<th scope=\"col\"><\/th>\r\n<th scope=\"col\">Description<\/th>\r\n<th scope=\"col\">Amount<\/th>\r\n<th scope=\"col\">Favorable or Unfavorable<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td><\/td>\r\n<td>Variable Overhead Cost Variance<\/td>\r\n<td class=\"r\">$465.00<\/td>\r\n<td class=\"highlight-green\">Favorable<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td>Variable Overhead Efficiency Variance<\/td>\r\n<td class=\"r\">84.00<\/td>\r\n<td class=\"highlight-green\">Favorable<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td>Overall Variable Overhead Variance<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 $ 549.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"highlight-green\">Favorable<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nThis shows that our VOH costs are under-budget. Remember that both the cost and efficiency variances, in this case, were negative showing that we were under budget, making the variance favorable.\r\n\r\nBefore we go on to explore the variances related to fixed indirect costs (fixed manufacturing overhead), check your understanding of the variable overhead efficiency variance.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\n[ohm_question hide_question_numbers=1]217942[\/ohm_question]\r\n\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Compute the variable overhead efficiency variance<\/li>\n<\/ul>\n<\/div>\n<p>As a formula, the <strong>Variable Overhead Efficiency Variance<\/strong> is similar to the direct materials efficiency variance and the direct labor efficiency variance. We use the actual quantity of the cost driver for Actual Quantity (AQ) and the expected quantify for the Standard Quantity (SQ), and the burden rate for Standard Cost (SC):<\/p>\n<p>Variable Overhead Efficiency Variance = <strong>(AQ \u2013 SQ) x SC<\/strong><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-681 alignright\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/11200301\/3.1.3-Guitar-200x300.jpg\" alt=\"A picture of a guitar\" width=\"200\" height=\"300\" \/>Alternatively, the Variable Overhead Efficiency Variance could be calculated by multiplying Actual Quantity (AQ) by the Standard Cost (SC) which would give the total variable overhead without regard to the expected rate, and from that, subtracting from it the product of the Standard Quantity (SQ) multiplied by the Standard Cost (SC) which would give the total expected variable overhead if we\u2019d predicted it accurately. By using standard cost against both the actual and expected quantity, we get the variance in dollars that is attributed to quantity only.<\/p>\n<p><strong>(AQ x SC) \u2013 (SQ x SC)<\/strong><\/p>\n<p>Boulevard Blanks has decided to allocate overhead based on direct labor hours (DLH).\u00a0 The standard variable OH rate per DLH is $0.80 (calculated previously) and the actual variable overhead for the month was $1,395 for 2,325 actual direct labor hours giving an actual rate of $0.60.<\/p>\n<p>It took our workers 2,325 hours to do what we expected them to do in 2,430 hours. Let\u2019s do the calculation:<\/p>\n<p><strong>(AQ \u2013 SQ) x SC<\/strong><\/p>\n<p>(2,325 &#8211; 2,430) x $0.80 = -105 x $0.80 = -$84.00<\/p>\n<p>Alternatively:<\/p>\n<p>(AQ * SC) &#8211; (SQ * SC) = (2,325 * $0.80) &#8211; (2,430 * $0.80) = $1,860 &#8211; $1,944 = -$84.00<\/p>\n<p>Even though the answer is a negative number, the variance is favorable because we used less indirect materials than we budgeted.<\/p>\n<p>Let\u2019s look at the two variances together:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<thead>\n<tr class=\"u-sr-only\">\n<th scope=\"col\"><\/th>\n<th scope=\"col\">Description<\/th>\n<th scope=\"col\">Amount<\/th>\n<th scope=\"col\">Favorable or Unfavorable<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><\/td>\n<td>Variable Overhead Cost Variance<\/td>\n<td class=\"r\">$(465.00)<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>Variable Overhead Efficiency Variance<\/td>\n<td class=\"r\">(84.00)<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 $ (549.00)<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"highlight-green\">Favorable<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>And relate them back to the budget v. actual report:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<caption>Boulevard Blanks<br \/>\nPartial Income Statement<br \/>\nFor the month ended July 31, 20XX<\/caption>\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Actual<\/th>\n<th class=\"r\" scope=\"col\">Budget<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td>Sales revenue<\/td>\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 178,200.00<\/td>\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 178,200.00<\/td>\n<\/tr>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Variable manufacturing costs<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Direct materials<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 38,080.00<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 38,880.00<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Direct Labor<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 46,500.00<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 43,740.00<\/td>\n<\/tr>\n<tr>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Allocated overhead<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,395.00<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,944.00<\/td>\n<\/tr>\n<tr>\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Fixed manufacturing costs<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Allocated overhead<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 13,485.00<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 13,365.00<\/td>\n<\/tr>\n<tr>\n<td>Cost of Goods Manufactured and sold<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 99,460.00<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 97,929.00<\/td>\n<\/tr>\n<tr>\n<td>Gross Profit<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 78,740.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 80,271.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>We can double-check our work by reconciling the two variances to the overall variance in the budget:<br \/>\n(actual quantity x actual cost) &#8211; (standard quantity x standard cost)<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\">AQ<\/th>\n<th class=\"r\" scope=\"col\">AP<\/th>\n<th class=\"r\" scope=\"col\">SQ<\/th>\n<th class=\"r\" scope=\"col\">SC<\/th>\n<th class=\"r\" scope=\"col\">TOTAL VAR<\/th>\n<th class=\"r\" scope=\"col\"><span class=\"u-sr-only\">Favorable or Unfavorable<\/span><\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td class=\"r\">\u00a0 \u00a0 2,325.00<\/td>\n<td class=\"r\">$\u00a00.60<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r highlight\">$ 1,395.00<\/td>\n<td>Actual indirect variable costs<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td class=\"r\">\u00a0 \u00a0 2,430.00<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 0.80<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 1,944.00<\/td>\n<td>Budgeted indirect variable costs<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>Variance<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 $(549.00)<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"highlight-green\">Favorable<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Again, in reporting to our internal users, we would omit the parenthesis that we use in accounting to show a negative amount, since that may confuse non-financial managers who are relying on the report. We would show the variances as follows:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<thead>\n<tr class=\"u-sr-only\">\n<th scope=\"col\"><\/th>\n<th scope=\"col\">Description<\/th>\n<th scope=\"col\">Amount<\/th>\n<th scope=\"col\">Favorable or Unfavorable<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><\/td>\n<td>Variable Overhead Cost Variance<\/td>\n<td class=\"r\">$465.00<\/td>\n<td class=\"highlight-green\">Favorable<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>Variable Overhead Efficiency Variance<\/td>\n<td class=\"r\">84.00<\/td>\n<td class=\"highlight-green\">Favorable<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>Overall Variable Overhead Variance<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 $ 549.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"highlight-green\">Favorable<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>This shows that our VOH costs are under-budget. Remember that both the cost and efficiency variances, in this case, were negative showing that we were under budget, making the variance favorable.<\/p>\n<p>Before we go on to explore the variances related to fixed indirect costs (fixed manufacturing overhead), check your understanding of the variable overhead efficiency variance.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p><iframe loading=\"lazy\" id=\"ohm217942\" class=\"resizable\" src=\"https:\/\/ohm.lumenlearning.com\/multiembedq.php?id=217942&theme=oea&iframe_resize_id=ohm217942\" width=\"100%\" height=\"150\"><\/iframe><\/p>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-118\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Variable Overhead Efficiency Variance. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Guitar on a wall. <strong>Provided by<\/strong>: Unsplash. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/unsplash.com\/photos\/5HltXT-6Vgw\">https:\/\/unsplash.com\/photos\/5HltXT-6Vgw<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/about\/cc0\">CC0: No Rights Reserved<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":364389,"menu_order":13,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Variable Overhead Efficiency Variance\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Guitar on a wall\",\"author\":\"\",\"organization\":\"Unsplash\",\"url\":\"https:\/\/unsplash.com\/photos\/5HltXT-6Vgw\",\"project\":\"\",\"license\":\"cc0\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-118","chapter","type-chapter","status-publish","hentry"],"part":25,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/118","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/users\/364389"}],"version-history":[{"count":15,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/118\/revisions"}],"predecessor-version":[{"id":1608,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/118\/revisions\/1608"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/parts\/25"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/118\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/media?parent=118"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=118"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/contributor?post=118"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/license?post=118"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}