The following information is for the third quarter of this year:

Planned Actual

Production 80,000 units 81,000 units

Direct Material Purchases 225,000 lbs. @ $ 3.00 225,000 lbs. @ $ 2.90

Direct Material Used 200,000 lbs. @ $ 3.00 200,500 lbs. @ $ 2.90

Direct labor 160,000 hrs. @ $ 10.00 140,000 hrs. @ $ 12.00

Variable manufacturing overhead $ 200,000 $ 202,000

Fixed manufacturing overhead $ 721,000 $ 723,500

Standard direct material pounds per unit 2.5

Standard direct labor hour per unit 2.0

Variable Overhead Rate per direct labor hour $ (VOH = Budgeted Variable Overhead / Budget Input)

Required: Calculate the following overhead variances; overhead is allocated based on direct labor hours.

1. Overhead volume variance
2. Overhead efficiency variance
3. Overhead spending variance
4. Formulate a hypothesis about the cause of these variances