Computation of variable overhead variances The following details have been extracted from the standard cost card for product X:

During October 5450 units of the product were made compared to a budgeted production target of 5500 units. The actual overhead costs incurred were:

The actual number of machine hours was 22 000 and the actual number of labour hours was 10 800.
Required:

(a) Calculate the overhead cost variances in as much detail as possible from the data provided. (12 marks)

(b) Explain the meaning of, and give possible causes for, the variable overhead variances which you have calculated. (8 marks)

(c) Explain the benefits of using multiple activity bases for variable overhead absorption.

Transcribed Image Text:

Variable overhead (/unit) 4 machine hours at 8.00/hour 2 labour hours at 4.00/hour Fixed overhead 32.00 8.00 20.00