Question - 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 124,000 units requiring 496,000 direct labor hours. (Practical capacity is 516,000 hours.) Annual budgeted overhead costs total $753,920, of which $555,520 is fixed overhead. A total of 119,100 units using 494,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $241,900, and actual fixed overhead costs were $556,350.
Required: Compute overhead variances using a two-variance analysis.