Great Fender is a competitor of Superior Fender. Great Fender also uses a standard cost system and provide the following information:

Static budget variable overhead

$4,608

Static budget fixed overhead

$23,040

Static budget direct labor hours

576

hours

Static budget number of units

24,000

units

Standard direct labor hours

0.024

hours per fender

Great Fender allocates manufacturing overhead to production based on standard direct labor hours. Great Fender reported the following actual results for 2016: the actual number of fenders produced, 20,000; actual variable overhead, $ 5,900; actual fixed overhead, $ 34,000; actual direct labor hours, 440.

Read the requirements

Requirement 1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.

2.	Explain why the variances are favorable or unfavorable.

Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity; VOH = variable overhead.)