For 2010, Riguilio Inc. set predetermined variable and fixed overhead rates, respectively, of $6.50 and $9.35 based on an expected monthly capacity of 4,000 machine hours. Each unit of product requires 1.25 machine hours.
During August 2010, the company produced 3,360 units and incurred $27,000 of variable overhead costs and $41,400 of fixed overhead costs. The firm used 4,100 machine hours during August 2010.
a. Using separate overhead rates, calculate overhead variances using the four-variance approach.
b. Using a combined overhead rate, calculate variances using the three-variance approach.
c. Using a combined overhead rate, calculate variances using the two-variance approach.
d. Using a combined overhead rate, calculate variances using the one-variance approach.