Belfair Kayak Company makes moulded plastic kayaks. Standard costs for an entry-level whitewater kayak are 

Direct materials, 60 kilograms @ $5.50 per kilogram......$330 

Direct labour, 1.5 hours @ $16 per hour.............24 

Overhead, @ $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, Belfair produced 430 kayaks and had the following actual results: 

Direct materials purchased 28,000 kilograms @ $5.30/kg

Direct materials used 27,000 kilograms 

Direct labour 660 hours @ $15.90/hour 

Actual overhead $5,320 

1. Compute material, labour, and overhead variances. 

2. Interpret the variances. 

3. Suppose variable overhead were $3.84 per labour-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.