Overhead Variances, Two- And Three-Variance Analyses 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 122,000 units requiring 488,000 direct labor hours. (Practical capacity is 508,000 hours.) Annual budgeted overhead costs total $736,880, of which $541,680 is fixed overhead. A total of 119,500 units using 486,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $240,100, and actual fixed overhead costs were $555,900. Required: 1. Compute overhead variances using a two-variance analysis. Budget Variance 22,360 X Unfavorable Volume Variance 11,100 Unfavorable 2. Compute overhead variances using a three-variance analysis. Spending Variance $ 45,700 X Unfavorable Efficiency Variance 800 X Unfavorable Volume Variance Unfavorable