FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Overhead Variances, Two- And Three-Variance Analyses
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 $736,880, of which
$541,680 is fixed overhead. A total of 119,500 units using 486,000 direct labor hours were produced during the year. Actual variable overhead costs for the year
were $240,100, and actual fixed overhead costs were $555,900.
Required:
1. Compute overhead variances using a two-variance analysis.
Budget Variance
Volume Variance
Spending Variance
Efficiency Variance
Volume Variance
22,360 X
$
11,100
2. Compute overhead variances using a three-variance analysis.
45,700 X
Unfavorable
800 X
Unfavorable
Unfavorable
Unfavorable
Unfavorable
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Transcribed Image Text:Overhead Variances, Two- And Three-Variance Analyses 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 $736,880, of which $541,680 is fixed overhead. A total of 119,500 units using 486,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $240,100, and actual fixed overhead costs were $555,900. Required: 1. Compute overhead variances using a two-variance analysis. Budget Variance Volume Variance Spending Variance Efficiency Variance Volume Variance 22,360 X $ 11,100 2. Compute overhead variances using a three-variance analysis. 45,700 X Unfavorable 800 X Unfavorable Unfavorable Unfavorable Unfavorable
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