Overhead Variances

At the beginning of the year, Lopez Company had the following standard cost sheet for one of its chemical products:

Direct materials (4 lbs. @ $2.80)	$11.20
Direct labor (2 hrs. @ $18.00)	36.00
FOH (2 hrs. @ $5.20)	10.40
VOH (2 hrs. @ $0.70)	1.40
Standard cost per unit	$59.00

Lopez computes its overhead rates using practical volume, which is 80,000 units. The actual results for the year are as follows:

Units produced: 79,600

Direct labor: 158,900 hours at $18.80

FOH: $886,000

VOH: $127,400

Required:

1. Compute the variable overhead spending and efficiency variances.

Spending variance	$
Efficiency variance	$

2. Compute the fixed overhead spending and volume variances.

Spending variances	$
Volume variances	$

PROBLEM NUMBER 2. Healder Company provided information on the following three overhead activities.

Activity	Driver	Fixed Cost	Variable Rate
Engineering	Engineering hours	$67,500	$5.60
Machining	Machine hours	35,700	1.50
Receiving	Receiving orders	50,700	3.70

Healder has found that the following driver levels are associated with two different levels of production.

Driver	40,000 units	50,000 units
Engineering hours	550	730
Machine hours	29,800	37,300
Receiving orders	9,200	12,000

Prepare an activity-based flexible budget for the two levels of activity. (Note: Enter all amounts as positive amounts.)

Healder Company

Activity-based Flexible Budget

1				40,000 units	50,000 units
2		Fixed	Variable	550 eng. hrs.	730 eng. hrs.
3	Engineering
4		Fixed	Variable	29,800 mhrs	37,300 mhrs
5	Machining
6		Fixed	Variable	9,200 Orders	12,000 Orders
7	Receiving
8	Total