Montoursville Control Company, which manufactures electrical switches, uses a standard-costing system. The standard manufacturing overhead costs per switch are based on direct-labor hours and are as follows:
Variable overhead (5 hours @ $8.00 per hour) | $ 40 |
Fixed overhead (5 hours @ $12.00 per hour)* | 60 |
Total overhead | $100 |
*Based on capacity of 300,000 direct-labor hours per month.
The following information is available for the month of October.
• Variable overhead costs were $2,340,000.
• Fixed overhead costs were $3,750,000.
• 56.000 switches were produced, although 60,000 switches were scheduled to be produced.
• 275,000 direct-labor hours were worked at a total cost of $2,550,000.
Required: Compute the variable-overhead spending and efficiency variances and the fixed-overhead budget and volume variances for October. Indicate whether a variance is favorable or unfavorable where appropriate.
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