Chapter 23, Problem E23.21E

Calculating overhead variances
Learning Objective 4

1, VOH Cost Var. $1,600 U

Mills, Inc, is a competitor of Murry, Inc, from Exercise E23-18 Mills also uses a standard cost system and provides the following information.

Static budget variable overhead	$1,200
Static budget fixed overhead	$ 1,600
Static budget direct labor hours	800 hours
Static budget number of units	400 units
Standard direct labor hours	2 hours per unit

Mills allocates manufacturing overhead to production based on standard direct labor hours. Mills reported the following actual results for 2018: actual number of units produced, 1,000; actual variable overhead, $4,000; actual fixed overhead, $3,100; actual direct labor hours, 1,600

Requirements
1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances.

2. Explain why the variances are favorable or unfavorable.