Poulsbo Kayak Company makes molded plastic kayaks. Standard costs for an entry-level whitewater kayak are as follows:

Direct materials, 60 lb. at $5.50/lb. … $330

Direct labor, 1.5 hr. at $16/hrs. ………… 24

Overhead, at $12 per kayak …………. 12

Total ………………………………. $366

The overhead rate assumes production of 450 kayaks per month. The overhead cost function is $2,808 + ($5.76 * number of kayaks).

During March, Poulsbo produced 430 kayaks and had the following actual results:

1. Compute material, labor, and overhead variances.

2. Interpret the variances.

3. Suppose the cost function for variable overhead was $3.84 per labor hour instead of $5.76 per kayak. Compute the variable-overhead efficiency variance and the total overhead spending variance. Would these variances lead you to a different interpretation of the overhead variances from the interpretation in requirement 2? Explain.