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Chilton allocates variable manufacturing overhead costs on the basis of machine hours. Chilton budgeted .5 machine hours per lamp and allocates overhead at a rate of $1.80 per machine hour. Last year Chilton manufactured 23,000 lamps, used 13,800 machine hours and incurred actual overhead costs of $15,180.
If the company is getting materials for less than the standard cost or is using less than the standard materials for a product, that would be favorable). 2. Labor rate variance & labor efficiency variance. Labor rate variance measures deviation from standard in the average hourly rate paid to direct labor workers. Labor efficiency variance attempts to measure the productivity of direct labor. 3. Variable overhead spending variance & variable overhead efficiency variance.