Western Sugar processes sugar beets into granulated sugar that is sold to food companies...

Western Sugar processes sugar beets into granulated sugar that is sold to food companies. It uses a standard cost system to aid in cost control and performance evaluation. To compute the standards for next year, the actual expense incurred by expense category is divided by the bushels of sugar beets processed to arrive at a standard cost per bushel. These per-bushel standards are then increased by the expected amount of inflation forecast for that expense category. This year, Western Sugar processed 63 million bushels of beets. The accompanying table calculates next year’s standard costs.

Required:

a. What do you think is the reason for the overhead variances?

b. Is it appropriate to base next year’s standards on last year’s costs?