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 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 119,100 units using 494,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,100, and actual fixed overhead costs were $555,550. Required: 1. Compute the fixed overhead spending and volume variances. Fixed Overhead Spending Variance Fixed Overhead Volume Variance 2. Compute the variable overhead Variable Overhead Spending Variance Variable Overhead Efficiency Variance $ - Select your answer - FavorableUnfavorableltem 2 $ - Select your answer - FavorableUnfavorableltem 4 spending and efficiency variances. Do not round intermediate calculations $ - Select your answer - FavorableUnfavorableltem 6 $- Select your answer - FavorableUnfavorableltem 8
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 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 119,100 units using 494,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,100, and actual fixed overhead costs were $555,550. Required: 1. Compute the fixed overhead spending and volume variances. Fixed Overhead Spending Variance Fixed Overhead Volume Variance 2. Compute the variable overhead Variable Overhead Spending Variance Variable Overhead Efficiency Variance $ - Select your answer - FavorableUnfavorableltem 2 $ - Select your answer - FavorableUnfavorableltem 4 spending and efficiency variances. Do not round intermediate calculations $ - Select your answer - FavorableUnfavorableltem 6 $- Select your answer - FavorableUnfavorableltem 8
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text: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 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 119,100 units using 494,000 direct
labor hours were produced during the year. Actual variable overhead costs for the year were $260,100, and actual fixed overhead
costs were $555,550.
Required:
1. Compute the fixed overhead spending and volume variances.
Fixed Overhead Spending
Variance
Fixed Overhead Volume
Variance
2. Compute the variable overhead
Variable Overhead Spending
Variance
Variable Overhead Efficiency
Variance
$ - Select your answer -
FavorableUnfavorableltem 2
$ - Select your answer -
FavorableUnfavorableltem 4
spending and efficiency variances. Do not round intermediate calculations
$ - Select your answer -
FavorableUnfavorableltem 6
$ - Select your answer -
FavorableUnfavorableltem 8
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