Question:
Innova Company's overhead rate was based on estimates of $200,000 for overhead costs and 20,000 direct labour hours. Innova's standards allow 2 hours of direct labour per unit produced. Production in May was 900 units, and actual overhead incurred in May was $18,800. The overhead budgeted for 1,800 standard direct labour hours is $17,600 ($5,000 fixed and $12,600 variable).
Instructions
(a) Compute the total, controllable, and volume variances for overhead.
(b) What are possible causes of the variances computed in part (a)?