Derf Company applies overhead on the basis of direct labor hours. Two direct lab

Question

Derf Company applies overhead on the basis of direct labor hours. Two direct labor hours are required for each product unit. Planned production for the period was set at 9,000 units. Manufacturing overhead for the period is budgeted at $135,000, of which 20 percent is fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Manufacturing overhead cost incurred was $136,500.Calculate the following three overhead variances:a. Overhead volume variance.b. Overhead efficiency variance.c. Overhead spending

Explanation / Answer

Overhead volume variance = 8500 - 9000 = 500 U Overhead efficiency variance = 17200-17000 = 200 Overhead spending variance = $136,500-$135,000 = 1500

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