Lamp Light Limited (LLL) manufactures lampshades. It applies variable overhead on the basis of direct labor hours. Information from LLL’s standard cost card follows: During August, LLL had the follow

Variable Overhead Rate Variance: The formula for variable overhead rate variance is (actual rate - standard rate) x actual hours. In this case, the actual variable overhead rate is $9,510 / 16,200 hours = $0.587 per hour. The standard rate is $0.80 per hour. So the variable overhead rate variance is ($0.587 - $0.80) x 16,200 = -$3,438.96. This means the variance is unfavorable/underapplied because the actual rate was lower than the standard rate. Variable Overhead Efficiency Variance: The formula for variable overhead efficiency variance is (actual hours - standard hours) x standard rate. In this case, the standard rate is $0.80 per hour and the standard hours is 0.6 hours per unit. So the standard hours for 25,200 units is 25,200 x 0.6 = 15,120 hours. The actual hours is 16,200 hours. So the variable overhead efficiency variance is (16,200 - 15,120) x $0.80 = $864. This means the variance is favorable/overapplied because less hours were used than planned. Variable Overhead Spending Variance: The formula for variable overhead spending variance is (actual cost - expected cost) In this case, the expected cost is 25,200 x 0.6 x $0.80 = $12,096. The actual cost is $9,510. So the variable overhead spending variance is $9,510 - $12,096 = -$2,586. This means the variance is unfavorable/underapplied because the actual cost was lower than expected. Overall, the total variable overhead variance is favorable/overapplied by $864 - $2,586 = -$1,722.