Chapter 11 Flexible Budgets and Overhead Analysis 569 11-39 Overhead Variance Analysis OBJECTIVE m plant of Morril's Small Motor Division produces a major subassembly for a and control. The standard cost sheet for the subassembly follows: 6.0 The sepower motor for lawn mowers. The plant uses a standard costing system for production costing Direct materials (6.0 kg@ s5) Direct labour (1.6 hrs.@$12) Variable overhead (1.6 hrs.@$10) Fixed overhead (1.6 hrs. @$6 Standard unit cost $30.00 19.20 16.00 9.60 $74.80 During the year, the Chatham plant had the following actual production activity: . Production of motors totalled 50,000 units h The c Actual fixed overhead totalled $556,000 d. Actual variable overhead totalled $860,000. The Chatham plant's practical activity is 60,000 units per year. Standard overhead rates are com- puted based on practical activity measured in standard direct labour hours company used 82,000 direct labour hours at a total cost of S1,066,000. Required: . Compute the variable overhead spending and efficiency variances 2. CONCEPTUAL CONNECTION Compute the fixed overhead spending and volume vari Check figure: 1. VOH efficiency v $20,000 U ances. Interpret the volume variance. What can be done to reduce this variance