Alden Company uses a two-variance analysis for overhead variances. Practical capacity is defined as 32 setups and

Question:

Alden Company uses a two-variance analysis for overhead variances. Practical capacity is defined as 32 setups and 32,000 machine hours to manufacture 6,400 units for the year.

Selected data for 2010 follow:

Practical capacity--setups			32
Practical capacity--machine hours			32,000
Practical capacity--output volume (units)			6,400
Budgeted fixed factory overhead:
	Setup	$ 64,000
	Other	200,000	$ 264,000
Total factory overhead incurred			$ 480,000
Variable factory overhead rate:
	Per setup		$ 600
	Per machine hour		$ 5.00
Total standard machine hours for the units manufactured			30,000
Machine hours worked			35,000
Actual total number of setups			28
Standard MH per unit			5
Number of units manufactured during the period			6,000
Budgeted number of units to manufacture per setup			200
Standard number of setups for the units manufactured			30

Required
1. Compute (a) the total overhead spending variance, (b) the overhead efficiency variance, and (c) the total overhead flexible-budget variance for 2010.
2. Assume that the company includes all setup costs as variable factory overhead. The budgeted total fixed overhead, therefore, is $200,000, and the standard variable overhead rate per setup is $2,600. What are the (a) overhead spending, (b) efficiency, and (c) flexible-budget variances for the year?
3. Assume that the company uses only machine hours as the activity measure to apply both variable and fixed overhead, and that it includes all setup costs as variable factory overhead. What is the (a) overhead spending variance, (b) efficiency variance, and (c) flexible-budget variance for theyear?