Chapter 26, Problem 25E

(a)

To determine

Variances: The variances are used to calculate the find the variation in actual cost by comparing it to the standard cost. Variances normally find the difference in between cost that is actually incurred and cost which was estimated by the business

Overhead Variance: The variance which is used to determine the variation in actually incurred overhead cost and estimated overhead cost for the units produced.

Overhead Controllable Variance: Overhead controllable variance is determined by subtracting budgeted overhead to be incurred in standard hours from actual overhead incurred in the standard hours

Overhead Volume Variance: Overhead volume variance is the determined by multiplying the difference of normal capacity and standard hours with the fixed overhead rate.

To determine: The total, controllable and volume variances for overhead.

(b)

To determine

To identify: The possible causes of the variances computed in part (a).