Problem - Computing Overhead Variances
Consider the following additional information:
Static budget variable overhead $ 5,500
Static budget fixed overhead $ 22,000
Static budget direct labor hours 550 hours
Static budget number of units 22,000 units
Great Fender allocates manufacturing overhead to production based on standard direct labor hours. Great Fender reported the following actual results for 2014: actual variable overhead, $4,950; actual fixed overhead, $23,000.
Requirements
1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
2. Explain why the variances are favorable or unfavorable.