Question 8.2 (Total: 34 marks)

Hogwarts Company uses a standard cost system. Manufacturing overhead is applied to units of product on the basis of direct labour hours. The company's total budgeted variable and fixed manufacturing overhead costs at the denominator level of activity are $20,000 for variable overhead and $30,000 for fixed overhead. The predetermined overhead rate, including both fixed and variable components, is $2.00 per direct labour hour. The standards call for two direct labour hours per unit of output produced. Last year, the company produced 12,000 units of product and worked 20,000 direct labour hours. Actual costs were $22,380 for variable overhead and $31,300 for fixed overhead.

Required:

1. What is the denominator level of activity?
2. What were the standard hours allowed for the output last year?
3. What was the variable overhead spending variance?
4. What was the variable overhead efficiency variance?
5. What was the fixed overhead budget variance?
6. What was the fixed overhead volume variance?