Question:
(Overhead Variances) Abby"s Fine Meats manufactures packaged meats that are sold in grocery stores. The company uses a standard costing system and applies variable manufacturing overhead to each product based on the kilograms of raw meat used in production. The standard variable overhead rate for the company is $0.35 per kg of raw meat. Each product uses an average of 0.50 kg of raw meat. For the year ended December 31, 2012, the actual variable overhead was $258,000. During 2012, a total of 860,000 kg of raw meat was used in the production of 1,800,000 packages of processed meat.
1. Determine the variable overhead variances for 2012.
2. What are the potential causes of these variances?