Variable and Fixed Manufacturing Overhead Variances
Response to the following problem:
Lauder Company manufactures one product. The standard capacity is 20,000 units per month. Manufacturing overhead costs are budgeted and applied on the basis of two machine hours per unit. At standard capacity, the monthly variable overhead budget is $500,000 and the monthly fixed overhead budget is $900,000. During February, 18,000 units of product were actually manufactured, $460,000 of variable manufacturing overhead was incurred, and $975,000 of fixed manufacturing overhead was incurred. Actual machine hours were 35,000.
1. Compute the variable manufacturing overhead spending and efficiency variances.
2. Compute the fixed manufacturing budget and volume variances.