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 124,000 units requiring 496,000 direct labor hours. (Practical capacity is 516,000 hours.) Annual budgeted overhead costs total $828,320, of which $590,240 is fixed overhead. A total of 119,000 units using 494,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,900, and actual fixed overhead costs were $555,450. Required: 1. Compute the fixed overhead spending and volume variances. Fixed Overhead Spending Variance $ Favorable/Unfavorable Fixed Overhead Volume Variance $ Favorable/Unfavorable 2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations Variable Overhead Spending Variance $ Favorable/Unfavorable Variable Overhead Efficiency Variance $ Favorable/Unfavorable

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 124,000 units requiring 496,000 direct labor hours. (Practical capacity is 516,000 hours.) Annual budgeted overhead costs total $828,320, of which $590,240 is fixed overhead. A total of 119,000 units using 494,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,900, and actual fixed overhead costs were $555,450.

Required:

1. Compute the fixed overhead spending and volume variances.

Fixed Overhead Spending Variance $
Favorable/Unfavorable
Fixed Overhead Volume Variance $
Favorable/Unfavorable

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

Variable Overhead Spending Variance $
Favorable/Unfavorable
Variable Overhead Efficiency Variance $
Favorable/Unfavorable
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