# Question: The Lubbock plant of Morril s Small Motor Division produces a

The Lubbock plant of Morril’s Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawn mowers. The plant uses a standard costing system for production costing and control. The standard cost sheet for the subassembly follows:
Direct materials (6.0 lbs. @ \$ 5.00) ....... \$ 30.00
Direct labor (1.6 hrs. @ \$ 12.00) ........ 19.20
VOH (1.6 hrs. @ \$ 10.00) ........... 16.00
FOH (1.6 hrs. @ \$ 6.00) ........... 9.60
Standard unit cost .............. \$ 74.80
During the year, the Lubbock plant had the following actual production activity:
(a) Production of motors totaled 50,000 units;
(b) The company used 82,000 direct labor hours at a total cost of \$ 1,066,000;
(c) Actual fixed overhead totaled \$ 556,000;
(d) Actual variable overhead totaled \$ 860,000. The Lubbock plant’s practical activity is 60,000 units per year. Standard overhead rates are computed based on practical activity measured in standard direct labor hours.
Required:
1. Compute the variable overhead spending and efficiency variances.
2. Compute the fixed overhead spending and volume variances. Interpret the volume variance. What can be done to reduce this variance?

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