Overhead Variances

Extrim Company produces monitors. Extrims plant in San Antonio uses a standard costing system. The standard costing system relies on direct labor hours to assign overhead costs to production. The direct labor standard indicates that 4 direct labor hours should be used for every monitor produced. (The San Antonio plant produces only one model.) The normal production volume is 120,000 units. The budgeted overhead for the coming year is as follows:

FOH	$1,286,400
VOH	888,000*

*At normal volume.

Extrim applies overhead on the basis of direct labor hours.

During the year, Extrim produced 119,000 units, worked 487,900 direct labor hours, and incurred actual fixed overhead costs of $1.3 million and actual variable overhead costs of $927,010.

Required:

1. Calculate the standard fixed overhead rate and the standard variable overhead rate. Standard fixed overhead rate $ per direct labor hour Standard variable overhead rate $ per direct labor hour

2. Compute the applied fixed overhead and the applied variable overhead. What is the total fixed overhead variance? Total variable overhead variance? Enter variance amounts as positive numbers and select Overapplied or Underapplied.

Applied fixed overhead		$
Applied variable overhead		$
Total fixed overhead variance		$	Underapplied
Total variable overhead variance		$	Underapplied

3. CONCEPTUAL CONNECTION Break down the total fixed overhead variance into a spending variance and a volume variance. Enter amounts as positive numbers and select Favorable or Unfavorable.

Spending variance		$	Unfavorable
Volume variance		$	Unfavorable

4. CONCEPTUAL CONNECTION Compute the variable overhead spending and efficiency variances. Enter amounts as positive numbers and select Favorable or Unfavorable.

Spending variance		$	Unfavorable
Efficiency variance		$	Unfavorable