Anpax, Inc., manufactures two products: L7 and Q2. Overhead is allocated to products based on machine hours. Management uses a flexible budget to forecast overhead. For the current year, fixed factory overhead is projected to be $2.75 million, and variable factory overhead is budgeted at $20 per machine hour. At the beginning of the year, management developed the following standards for each product and made the following production forecasts for the year:
Required:
a. Calculate the overhead rate for the current year.
b. Calculate materials and labor variances. Report quantity (efficiency) variances and price variances.
c. Calculate the volume, spending, and efficiency overhead variances.
d. Your boss (a nonaccountant) asks you to explain in nontechnical terms the meaning of each overhead variance.
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