Question
Montoursville Control Company, which manufactures electrical switches, uses a standard-costing system. The standard production overhead costs per switch are based on direct-labor hours and are
Montoursville Control Company, which manufactures electrical switches, uses a standard-costing system. The standard production overhead costs per switch are based on direct-labor hours and are as follows:
Variable overhead (5 direct-labor hours @ $8.00 per hour) | $ | 40 | |
Fixed overhead (5 direct-labor hours @ $12.00 per hour)* | 60 | ||
Total overhead | $ | 100 | |
*Based on capacity of 300,000 direct-labor hours per month. The following information is available for the month of October.
Variable-overhead costs were $2,340,000.
Fixed-overhead costs were $3,750,000.
56,000 switches were produced, although 60,000 switches were scheduled to be produced.
275,000 direct-labor hours were worked at a total cost of $2,550,000.
Required: Compute the variable-overhead spending and efficiency variances and the fixed-overhead budget and volume variances for October. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)
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