Alden Company uses a three-variance analysis for factory overhead variances. Practical capacity is defined as 32 setups

Question:

Alden Company uses a three-variance analysis for factory overhead variances. Practical capacity is defined as 32 setups and 32,000 machine hours to manufacture 6,400 units for the year. Selected data for 2019 follow:

Budgeted fixed factory overhead: Setup cost Other Total factory overhead cost Incurred Varlable factory overhead rate: P

Required
1. Compute: (a) the total overhead spending variance, (b) the overhead efficiency variance, and (c) the total overhead flexible-budget variance for 2019. Label each variance as favorable (F) or unfavorable (U); round all variances to the nearest whole dollar.

2. Assume that the company includes all setup costs as variable factory overhead. The budgeted total fixed overhead, therefore, is $200,000, and the standard variable overhead rate per setup is $2,600. What is: (a) the total overhead spending variance, (b) the overhead efficiency variance, and (c) the total overhead flexible-budget variance for the year? Label each variance as favorable (F) or unfavorable (U); round all variances to the nearest whole dollar.

3. Assume that the company uses only machine hours as the activity measure to apply both variable and fixed overhead, and that it includes all setup costs as variable factory overhead. What is (a) the Total Overhead Spending Variance, (b) the Overhead Efficiency Variance, and (c) total Overhead Flexible- Budget Variance for the year? [Note: Round the standard variable overhead application rate per machine hour to 2 decimal places; round variance calculations to nearest whole dollar; indicate whether each variance is favorable (F) or unfavorable (U).]

4. What is the primary conceptual lesson derived from the preceding calculations?

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