Overhead Variances Meanwhile Products uses standard costing. The following infor

Question

Overhead Variances

Meanwhile Products uses standard costing. The following information about overhead was generated during August:

Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances.

Standard variable overhead rate $2.50 per machine hour Standard fixed overhead rate $3.00 per machine hour Actual variable overhead costs $60,100 Actual fixed overhead costs $68,800 Budgeted fixed overhead costs $70,000 Standard machine hours per unit produced 2.8 Good units produced 8,000 Actual machine hours 24,200

Explanation / Answer

1. Varaible Overheasd spendig variance = Std varaible overheads for actual hours - Actual variable overheads

= 24200 * 2,5 - 60,100 = 60,500 - 60,100 = $ 400 ( Favorable)

2. Varaible Overheasd efficiency variance =

Std Varaible Overheads for production - Std Varaible overheads for actual Hours

= 8000 * 2.8 * 2.5 - 24200 * 2.5 = $ 56,000 - $ 60,500 = $ 4,500 (Unfavorable)

3. Fixed Overheads Budget variance = Budgeted Fixed Overheads - Actual Fixed Overheads

= 70,000 - 68,800 = $ 1,200 (Favorable)

4. Fixed Overheads volume variance = Absorbed Fixed Overheads - Budgeted Fixed Overheads

= 8000 * 2.8 * 3 - 70,000 = 67,200 - 70,000 = $ 2,800 (Unfavorable)

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