The Management of Sawmill Industries Is Analyzing Variable Overhead Variances

Essay

The management of Sawmill Industries is analyzing variable overhead variances for the fiscal period just ended. It notices that the total flexible budget variable overhead variance was $120,000 Favorable and that the variable overhead spending variance was $260,000 Favorable. However, Sawmill's accountants had failed to calculate the variable overhead efficiency variance. Management examined the budget and discovered that the flexible budget had allowed for $600,000 variable overhead. It also discovered that actual usage of direct materials (the single variable overhead cost driver) was 100,000 pounds.
Calculate Sawmill's variable overhead efficiency variance.