Blue Gum Ltd uses a standard costing system. The firm estimates that it will operate its manufacturing facilities at 800 000 machine hours for the year. The estimate for total budgeted overhead is $2 000 000. The standard variable overhead rate is estimated to be $2 per machine hours or $6 per unit. The actual data for the year are presented below:

Actual units produced	250 000
Actual machine hours	764 000
Actual variable overhead	$1 701 000
Actual fixed overhead	$392 000

Required:

1. Calculate the following variances. Indicate whether each is favorable or unfavorable.

1. Variable overhead spending variance.
2. Variable overhead efficiency variance.
3. Fixed overhead budget variance.
4. Fixed overhead volume variance.

2. Prepare journal entries to add manufacturing overhead to work in process inventory and to record the variances and the actual overhead costs.