Great, Inc, uses a standard cost system and provides the following information. E: (Click the icon to view the information.) Great allocates manufacturing overhead to production based on standard direct labor hours. Great reported the following actual results for 2018: actual number of units produced, 1,000; actual variable overhead, $3,800; actual fixed overhead, $3,000; actual direct labor hours, 1,500. $ $ 1.500 2,250 Static budget variable overhead Static budget fixed overhead Static budget direct labor hours Static budget number of units Standard direct labor hours 750 hours 375 units 2 hours per unit Requirement 1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances. 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.) Formula Variance VOH cost variance VOH efficiency variance Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume 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.) Formula Variance FOH cost variance FOH volume variance Requirement 2. Explain why the variances are favorable or unfavorable. The variable overhead cost variance is because the actual cost per direct labor hour was than the standard cost per direct labor hour. direct labor The variable overhead efficiency variance is because management used hours than standard and variable overhead is applied (incurred) based on direct labor. because the total fixed overhead cost was than the The fixed overhead cost variance is amount budgeted for total fixed overhead. The fixed overhead volume variance is because total fixed overhead cost allocated to units was than the total budgeted fixed overhead cost