Question
Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 90,000 direct-labor hours as follows:
Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 90,000 direct-labor hours as follows:
Standard costs per unit (one box of paper):
Variable overhead (2 direct-labor hours @ $4)........................$8
Fixed overhead (4 direct-labor hours @ $12)..............................$48
Total...................................................................................$56
During April, 25,000 units were scheduled for production: however, only 20,000 units were actually produced. The following data relate to April.
- Actual direct-labor cost incurred was $1,782,000 for 99,000 actual hours of work.
- Actual overhead incurred totaled $1,435,200, of which $475,200 was variable and $960,000 was fixed.
Required:
What is the:
- Variable-overhead spending variance.
- Variable-overhead efficiency variance.
- Fixed-overhead budget variance.
- Fixed-overhead volume variance.
State whether each variance is favorable or unfavorable, where appropriate
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