Variable overhead efficiency variance equals:
AOutput × Rate
B(Actual hours − Standard) × Actual rate
CVolume × Rate
D(Standard hours − Actual hours) × Standard variable rate
Answer & Solution
Correct answer: D. (Standard hours − Actual hours) × Standard variable rate
1. Variable overhead efficiency variance follows the labour efficiency pattern.
2. The difference between standard hours for actual output and actual hours is valued at the standard variable overhead rate.
3. This isolates the efficiency effect on variable overhead.
4. Hence the formula is (SH − AH) × SVR.
_Source: ICAI BoS Inter Paper 3, Ch 13 "Standard Costing", §13.5.3 ¶2_
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