Overhead Variances, Two- And Three-Variance Analyses 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 123,000 units requiring 492,000 direct labor hours. (Practical capacity is 512,000 hours.) Annual budgeted overhead costs total $772,440, of which $555,960 is fixed overhead. A total of 119,300 units using 490,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $241,100, and actual fixed overhead costs were $556,200. Required:

FINANCIAL ACCOUNTING
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Overhead Variances, Two- And Three-Variance Analyses
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 123,000 units requiring 492,000 direct labor hours. (Practical capacity is 512,000 hours.) Annual budgeted
overhead costs total $772,440, of which $555,960 is fixed overhead. A total of 119,300 units using 490,000 direct labor hours were
produced during the year. Actual variable overhead costs for the year were $241,100, and actual fixed overhead costs were $556,200.
Required:
1. Compute overhead variances using a two-variance analysis.
Budget Variance
31,672 X
Unfavorable
209,968 X
Unfavorable
Volume Variance
2. Compute overhead variances using a three-variance analysis.
Spending Variance
Unfavorable
%24
Unfavorable
Efficiency Variance
Volume Variance
24
Unfavorable
Transcribed Image Text:Overhead Variances, Two- And Three-Variance Analyses 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 123,000 units requiring 492,000 direct labor hours. (Practical capacity is 512,000 hours.) Annual budgeted overhead costs total $772,440, of which $555,960 is fixed overhead. A total of 119,300 units using 490,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $241,100, and actual fixed overhead costs were $556,200. Required: 1. Compute overhead variances using a two-variance analysis. Budget Variance 31,672 X Unfavorable 209,968 X Unfavorable Volume Variance 2. Compute overhead variances using a three-variance analysis. Spending Variance Unfavorable %24 Unfavorable Efficiency Variance Volume Variance 24 Unfavorable
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