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Tage Inc. employs a standard costing system. The company has capacity to produce 300,000 units per year and applies overhead is applied on the basis
Tage Inc. employs a standard costing system. The company has capacity to produce 300,000 units per year and applies overhead is applied on the basis of direct labour hours. The standard costing system allows two direct labour hours per unit produced. For 2021, the company budgeted variable overhead to be $2,280,000 and fixed overhead to be $900,000. Actual results for the year are as follows: Units produced Direct labour Variable overhead Fixed overhead 280,000 570,000 hours $2,337,000 $872,000 Required: (A) Compute the predetermined variable overhead rate (SVOR). (B) Compute the variable overhead spending variance and the variable overhead efficiency variance and indicate whether each variance is favourable or unfavourable. (C) Compute the predetermined fixed overhead rate (SFOR). (D) Compute the applied fixed overhead. [Note, you will need to use the Standard Hours in your calculation.] (E) Compute the fixed overhead spending variance and the fixed overhead volume variance. (F) How do the variable overhead variances and the fixed overhead variances help managers (i.e., what do the variances tell us)
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