Sade Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.
The company has reported the following actual results for the product for December:
Required:a. Compute the variable overhead rate variance for December.b. Compute the variable overhead efficiency variance for December.

a. Variable overhead rate variance = (Actual hours × Actual hours) − (Actual hours × Standard rate)
= Actual hours × (Actual hours − Standard rate)
= 1,160 hours × ($6.80 per hour − $7.00 per hour)
= 1,160 hours × (−$0.20 per hour)
= $232 Favorable
b. Standard hours = 5,300 units × 0.20 hours per unit = 1,060 hours
Variable overhead efficiency variance = (Actual hours × Standard rate) − (Standard hours × Standard rate)
= (Actual hours − Standard hours) × Standard rate
= (1,160 hours − 1,060 hours) × $7.00 per hour
= (100 hours) × $7.00 per hour
= $700 Unfavorable