Chapter 8, Problem 8.32E

Overhead variances, service setting. Carlyle Capital Company offers financial services to its clients. Recently, Carlyle has experienced rapid growth and has increased both its client base and the variety of services it offers. The company is becoming concerned about its rising costs, however, particularly related to technology overhead.

After some study, Carlyle determines that its variable and fixed technology overhead costs are both driven by the processing time involved in meeting client requests. This is typically measured in CPU units of their computer usage. Carlyle’s measure of output is the number of client interactions in a given period. The technology budget for Carlyle for the first quarter of 2017 was as follows:

Client interactions	12,000
Fixed Overhead	$14,400
Variable Overhead	4,800 CPU units @ $2 per CPU unit

The actual results for the first quarter of 2017 are given below:

Client interactions	13,600
Fixed Overhead	$14,100
Variable Overhead	$11,200
CPU Units used	5,500

1. A. Calculate the variable overhead spending and efficiency variances, and indicate whether each is favorable (F) or unfavorable (U).

  Required

1. B. Calculate the fixed overhead spending and production-volume variances, and indicate whether each is favorable (F) or unfavorable (U).
2. C. Comment on Carlyle Capital’s overhead variances. In your view, is the firm right to be worried about its control over technology spending?