Question

Overhead Variances, Four-Variance Analysis

Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 129,000 units requiring 516,000 direct labor hours. (Practical capacity is 536,000 hours.) Annual budgeted overhead costs total $861,720, of which $608,880 is fixed overhead. A total of 119,000 units using 514,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,100, and actual fixed overhead costs were $555,750.

Required:

1. Compute the fixed overhead spending and volume variances.

Fixed Overhead Spending Variance	$
Fixed Overhead Volume Variance	$

2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations

Variable Overhead Spending Variance	$
Variable Overhead Efficiency Variance	$

Answer 1

Government of West Bengal ed overhead spending and vemt Vuone Seen Computation of fixed overhead Fixed overhead Spending variante Actual overhead Budget cd overhead cost ($555150 - $608;980) les lavourable Fixed verhead rolume. Voiame Budgetel hours - Standard hours allowed actual preciatima) x predetermined Overhead rale 516000 -- (4x479000)} x 1.18 (47.200) 516000 -476000) X1.18 , un forourable Budgeted éxed overhead $ 608,880 Qudgeted showus. 51670-00 hours et Cactual pre determined 608680 overhead rate 516000 =1:18 per hour Standard hours = 516000 hrs. - 2.4 heuns 129 070 SS Units

School Education Departm The fixed overhead volume, variance indicate he efficiency an inefficiency in rutilizing the production facilities. Overhead volume variance of $ 47200 is unfavorable because standard hours allowed fero actual production are less than the budgeted hours which means a less efficient use of production facilities. fixed overhead spending or variance is in favourable condition because actual, overhead lost must be lessers than budgeted fixed evero head cost, If they spends more fixed cost then it will be in unfavourable. Condition.

variable Computation of tad svechead Spendingepartin variable rechead spending variance + Actral howls wooked X (Actual overhead rate - Standard coveshead valt) 514000 hrs (0.506--0:49) favourable variable overhead efficiency variance 8224 Standard overhead ratê x (Actual hours - Standard) hours 0.49 x (514000 - 516000) (980) unfavourable Aethal eresohead sate = Actual variable lost Actual Labour he hours $260100 51h00 hrs Standard z 0.506 overhead sale - Standard variable cost $252840 Standard Labows hour 516010 0.49