Manufacturing overhead variance relationships Hyte II Manufacturing produces high- speed printers for stand alone word processing systems. The printers require 10 direct labor hours to produce. The company uses a standard cost system to account for production costs, and overhead is applied to production at the rate of $5 per direct labor hour.

The 1992 production budget called for the manufacture and sale of 2,000 printers. Budgeted fixed overhead costs were $60,000. During the year, 1,900 printers were actually produced. At year end, the company's accountant computed the following overhead variances using one of the three-variance methods.

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Spending variance Efficiency variance $3,600 F 10,000 U Capacity variance 3,000 F