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 120,000 units requiring 480,000 direct labor hours. (Practical capacity is 500,000 hours.) Annual budgeted overhead costs total $787,200, of which $556,800 is fixed overhead. A total of 119,400 units using 478,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $230,600, and actual fixed overhead costs were $556,250. Required: 1. Compute the fixed overhead spending and volume variances. Fixed Overhead Spending Variance $ Favorable  Fixed Overhead Volume Variance $ Unfavorable  2. Compute the variable overhead spending and efficiency variances. Variable Overhead Spending Variance $ Unfavorable  Variable Overhead Efficiency Variance $ Unfavorable

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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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 120,000 units requiring 480,000 direct labor hours. (Practical capacity is 500,000 hours.) Annual budgeted overhead costs total $787,200, of which $556,800 is fixed overhead. A total of 119,400 units using 478,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $230,600, and actual fixed overhead costs were $556,250.

Required:

1. Compute the fixed overhead spending and volume variances.

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

2. Compute the variable overhead spending and efficiency variances.

Variable Overhead Spending Variance $ Unfavorable 
Variable Overhead Efficiency Variance $ Unfavorable 
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