Exercise 24.11 Overhead Cost Variances (LO24-4, LO24-5)

Zeta, Inc., produces handwoven rugs. Budgeted production is 5,000 rugs per month and the standard direct labor required to make each rug is 2 hours. All overhead is allocated based on direct labor hours. Zeta's manager is interested in what caused the recent month's $3,000 unfavorable overhead variance. The following information was available to aid in the analysis:

	Budgeted Amounts					Actual Results
Production in units			5,000					4,500
Total labor hours			10,000					9,000
Total variable overhead		$	60,000				$	55,000
Total fixed overhead			40,000					38,000
Total overhead		$	100,000				$	93,000

a.	What was the overhead spending variance for the month? (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

b.	What was the overhead volume variance? (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)