Nelson Co. manufactures a product that requires 3.5 machine hours per unit. The variable and fixed overhead rates were computed using expected capacity of 144,000 units (produced evenly throughout the year) and expected variable and fixed overhead costs, respectively, of $ 2,016,000 and $ 3,528,000. In October, Nelson manufactured 11,900 units using 41,800 machine hours. October variable overhead costs were $ 165,000; fixed overhead costs were $ 294,500.
a. What are the standard variable and fixed overhead rates?
b. Compute the variable overhead variances.
c. Compute the fixed overhead variances.
d. Explain the volume variance computed in (c).