Derf Company allocates overhead on the basis of direct labor
Derf Company allocates overhead on the basis of direct labor hours. Two direct labor hours are required for each unit of product. Planned production for the period was set at 9,000 units. Manufacturing overhead is estimated at $135,000 for the period (20% of this cost is fixed). The 17,200 hours worked during the period resulted in the production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and the fixed manufacturing overhead cost was $28,000.

REQUIRED
A. Determine the variable overhead spending variance.
B. Determine the variable overhead efficiency (quantity) variance.
C. Determine the fixed overhead spending (budget) variance.
D. Determine the production volume (fixed overhead volume or denominator) variance.
E. Prepare journal entries to close these variances at the end of the period.

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