Banner Inc bases its variable overhead performance report on the actual direct l

Question

Banner Inc bases its variable overhead performance report on the actual direct labor hours of the period. Data concerning the most recent year that ended on December 31 are as follows:
Budgeted direct labor hours 12,000
Actual direct labor hours 13,500
Standard direct labor hours allowed 13,000
Cost formula (per direct labor hours)
Indirect labor $0.85
Supplies $0.30
Electricity $0.15
Actual costs incurred:
Indirect labor $11,600
Supplies $4,000
Electricity $2,050

Management would like to compute both the spending and the efficiency variances for the variable overhead in the company’s variable overhead performance report. Prepare a variable overhead performance report with both the variable overhead spending and the efficiency variances. Show computations and details

Explanation / Answer

The variable overhead is calculated using more than just the computations that appear above. One of the biggest things to consider when computing variable overhead is "Labor Burden". I didn't see the labor burden calculation in your formula. Take a look at a page that spells out the cost of an employee...it may help.

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