The Chatham plant of Morril's Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawn mowers. The plant uses a standard costing system for production costing and control. The standard cost sheet for the subassembly follows:

Direct materials (6.0 kg @ $5) ..........................$30.00

Direct labour (1.6 hrs. @ $12) .......................... 19.20

Variable overhead (1.6 hrs. @ $10) .................... 16.00

Fixed overhead (1.6 hrs. @ $6) .......................... 9.60

Standard unit cost ........................................$74.80

During the year, the Chatham plant had the following actual production activity:

a. Production of motors totalled 50,000 units.

b. The company used 82,000 direct labour hours at a total cost of $1,066,000.

c. Actual fixed overhead totalled $556,000.

d. Actual variable overhead totalled $860,000.

The Chatham plant's practical activity is 60,000 units per year. Standard overhead rates are computed based on practical activity measured in standard direct labour hours.

Required:

1. Compute the variable overhead spending and efficiency variances.

2. Compute the fixed overhead spending and volume variances. Interpret the volume variance. What can be done to reduce this variance?