Question:
Factory Overhead Variance Analysis. The accountant for the McGee Com- pany prepared the following flexible monthly factory overhead budget:
|
Direct Labor Hours
10,400
|
Budgeted Factory Overhead
$21,600
|
|
9,600
|
20,400
|
|
8,800
|
19,200
|
|
8,000 (normal capacity)
|
18,000
|
|
7,200
|
16,800
|
In August the actual factory overhead was $21,200. The company operated at 125% of normal capacity. Standard hours allowed for actual production were 10,200.
Required: An analysis of factory overhead by (a) the two-variance method and (b) the three-variance method.