Question
Overhead Variances, Four-Variance Analysis Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based
Overhead Variances, Four-Variance Analysis Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 130,000 units requiring 520,000 direct labor hours. (Practical capacity is 540,000 hours.) Annual budgeted overhead costs total $868,400, of which $608,400 is fixed overhead. A total of 119,300 units using 518,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,600, and actual fixed overhead costs were $556,050. Required:
1. Compute the fixed overhead spending and volume variances.
Fixed Overhead Spending Variance $ -Favorable Unfavorable
Fixed Overhead Volume Variance $ -Favorable Unfavorable
2. Compute the variable overhead spending and efficiency variances.
Variable Overhead Spending Variance $ -FavorableUnfavorable
Variable Overhead Efficiency Variance $ -FavorableUnfavorableI
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