Overhead Variances, Four-Variance Analysis Oerstman, Inc., uses a standard costing system and develops its overhead rate

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Overhead Variances Four Variance Analysis Oerstman Inc Uses A Standard Costing System And Develops Its Overhead Rate 1 (185.97 KiB) Viewed 61 times

Overhead Variances, Four-Variance Analysis 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 122,000 units requiring 488,000 direct labor hours. (Practical capacity is 508,000 hours.) Annual budgeted overhead costs total $810,080, of which $580,720 is fixed overhead. A total of 119,300 units using 486,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,300, and actual fixed overhead costs were $555,750. Required: 1. Compute the fixed overhead spending and volume variances. Fixed Overhead Spending Variance 24,970 → Favorable Fixed Overhead Volume Variance 12, Unfavorable 2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations Variable Overhead Spending Variance $ 31,357 X Unfavorable Variable Overhead Efficiency Variance $ 4,152 X Unfavorable Feedback Check My Work 1. The four-variance method calculates two variances for variable overhead and two variances for fixed overhead. 2. The four-variance method calculates two variances for variable overhead and two variances for fixed overhead.