Chapter 8, Problem 14P

Materials, labor, and overhead variances–two-variance method

Fargo Co. manufactures products in batches of 100 units per batch. The company uses a standard cost system and prepares budgets that call for 500 of these batches per period. Budgeted fixed overhead is $60,000 per period. The standard costs per batch follow:

During the period, 503 batches were manufactured, and the following costs were incurred:

Required:

Calculate the variances for materials, labor, and overhead. For overhead, use the two-variance method. (Hint: Please use the information given about the budgeted fixed overhead to compute the variable overhead rate.)