Variable overhead efficiency variance
In one sentenceThe effect on variable overhead of using more or fewer hours than the standard hours for actual production, at the standard rate.
Simply put
If variable overhead follows labor hours, every extra hour brings extra electricity and operating supplies with it. This variance measures the cost of the extra hours in these costs.
Its cause is usually the same as the labor efficiency variance, so you find the two together in the same direction.
Worked example
A confectionery factory produced 1,000 boxes; the standard is half an hour per box, and it used 520 hours. The variable overhead rate is 20 SAR per hour.
Standard hours for actual production1,000 × 0.5 = 500 hours
Actual hours − Standard hours520 − 500 = 20 hours
× Standard rate20 × 20
Efficiency variance (unfavorable)400 SAR
Formula: (Actual hours − Standard hours for actual production) × Standard variable overhead rate
Don't confuse it with
Variable overhead spending varianceIt measures spending per hour, not the number of hours.