PLEASE SHOW ALL WORK AND EXPLANATIONS

Requirement 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.

Let's begin by calculating the variable overhead cost (VOH) variance. The variable overhead cost variance which measures the difference between the actual variable overhead (Actual hours x Actual cost) and the standard variable overhead for the actual allocation base incurred (standard cost). This variance measures how well the business keeps unit costs of variable overhead inputs within standards. Our cost variance will be the difference between what was actually incurred in variable overhead costs and the budgeted cost based on the actual hours used.

Actual VOH
(Actual hours x Actual cost)	- (	Actual hours	x	Standard cost	) =	VOH cost variance
$	- (		x	$	) =	$

Now, let's calculate the efficiency variance. The variable overhead efficiency variance measures the difference in the actual allocation base (actual quantity) and the amount of the allocation base that should have been used (standard quantity). This variance measures how well the business uses its variable overhead inputs. Remember that the efficiency variance is the difference between the standard cost of the actual hours used and the standard cost of the standard hours allowed.

(	Actual hours	-	Standard hours allowed	) x	Standard cost	=	VOH efficiency variance
(		-		) x	$	=	$

Now, indicate if each variance is favorable or unfavorable. Remember, a cost variance is favorable if the company spent fewer dollars than standard and is unfavorable if the company spent more dollars than standard. An efficiency variance is favorable if the company used fewer hours than standard and unfavorable if the company used more hours than standard.

VOH cost variance	$	F
VOH efficiency variance	$	U

Next, let's compute the fixed overhead (FOH) cost and volume variances.

We'll begin with the fixed overhead cost (FOH) variance. This fixed overhead cost variance measures the difference between actual fixed overhead and budgeted fixed overhead to determine the controllable portion of total fixed overhead variance. This variance measures how well the business keeps fixed overhead within standard. Go ahead and complete the calculation now.

Actual FOH	-	Budgeted FOH	=	FOH cost variance
$	-	$	=	$

Now, compute the fixed overhead volume variance. The fixed overhead volume variance measures the difference between the budgeted fixed overhead and theamount of overhead that should have been allocated to jobs based on the output. This variance measures how fixed overhead is allocated when actual volume is not equal to budgeted volume. Use the formula below to determine the volume variance.

Budgeted FOH	-	Allocated FOH	=	Volume variance
$	-	$	=	$

Now, indicate if the variance is favorable or unfavorable. Remember, a cost variance is favorable if the company spent fewer dollars than standard and is unfavorable if the company spent more dollars than standard. A fixed overhead volume variance is labeled as favorable if the company allocated more fixed overhead than was budgeted, and unfavorable if it allocated less fixed overhead than was budgeted.

FOH cost variance	$	F
FOH volume variance	$	F

Requirement 2. Explain why the variances are favorable or unfavorable.

A cost variance measures how well the business keeps unit costs of material and labor inputs within standards. An efficiency (or quantity) variance measures how well the business uses its materials or human resources. If a cost or efficiency variance is unfavorable it means that the actual amount spent or used was more than the amount budgeted. The fixed overhead volume variance measures the difference between the budgeted fixed overhead and the amount of overhead that should have been allocated to jobs based on the output. If the company has allocated more fixed overhead than was budgeted, it means that the company utilized its resources more efficiently (e.g., the fixed costs were spread over a higher number of outputs) than was budgeted and the variance is favorable.

Now, review each of the variances in our problem and explain why the variances are favorable or unfavorable.

The following information relates to Longman, Inc.'s overhead costs for the month: (Click the icon to view the information.) Requirements 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. 2. Explain why the variances are favorable or unfavorable. Requirement 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. Begin by selecting the formulas needed to compute the variable overhead (VOH) and fixed overhead (FOH) variances, and then compute each variance amount. VOH cost variance VOH efficiency variance = FOH cost variance II FOH volume variance Choose from any drop-down list and then click Check Answer. ? $ 7,500 Static budget variable overhead Static budget fixed overhead Static budget direct labor hours $ 3,000 1,500 hours Static budget number of units 7,500 units Longman allocates manufacturing overhead to production based on standard direct labor hours. Last month, Longman reported the following actual results: actual variable overhead, $10,800; actual fixed overhead, $2,790; actual production of 6,800 units at 0.30 direct labor hours per unit. The standard direct labor time is 0.2 direct labor hours per unit (1,500 static direct labor hours / 7,500 static units)