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 $823,360, 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 $261,400, and actua fixed overhead costs were $555,850. Required: 1. Compute the fixed overhead spending and volume variances. 34,390✔ Fixed Overhead Spending Variance Favorable Unfavorable Fixed Overhead Volume Variance 2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations Variable Overhead Spending Variance 29,220 Unfavorable Variable Overhead Efficiency Variance Unfavorable Feedback X Check My Work 1. The four-variance method calculates two variances for variable overhead and two variances for fixed overhead. 2. The four-variance method calculates two variances for variable overhead and two variances for fixed overhead.
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 $823,360, 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 $261,400, and actua fixed overhead costs were $555,850. Required: 1. Compute the fixed overhead spending and volume variances. 34,390✔ Fixed Overhead Spending Variance Favorable Unfavorable Fixed Overhead Volume Variance 2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations Variable Overhead Spending Variance 29,220 Unfavorable Variable Overhead Efficiency Variance Unfavorable Feedback X Check My Work 1. The four-variance method calculates two variances for variable overhead and two variances for fixed overhead. 2. The four-variance method calculates two variances for variable overhead and two variances for fixed overhead.
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 $823,360, 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 $261,400, and actual
fixed overhead costs were $555,850.
Required:
1. Compute the fixed overhead spending and volume variances.
Fixed Overhead Spending Variance
34,390 ✔
Favorable
Unfavorable
Fixed Overhead Volume Variance
2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations
Variable Overhead Spending Variance
29,220 ✔
Unfavorable
Unfavorable
Variable Overhead Efficiency Variance
Feedback
X
X
Check My Work
1. The four-variance method calculates two variances for variable overhead and two variances for fixed overhead.
2. The four-variance method calculates two variances for variable overhead and two variances for fixed overhead.
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