Nuevo Company produces a single product. Nuevo employs a standard cost system and uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Nuevo used a standard overhead rate equal to $6.25 per direct labor hour. The rate was computed using expected activity. Budgeted overhead costs are $80,000 for 10,000 direct labor hours and $120,000 for 20,000 direct labor hours. During the past year, Nuevo generated the following data:
a. Actual production: 4,000 units
b. Fixed overhead volume variance: $1,750 U
c. Variable overhead efficiency variance: $3,200 F
d. Actual fixed overhead costs: $41,335
e. Actual variable overhead costs: $70,000
Required:
1. Determine the fixed overhead spending variance.
2. Determine the variable overhead spending variance.
3. Determine the standard hours allowed per unit of product.
4. Assuming the standard labor rate is $9.50 per hour, compute the direct labor efficiency variance.