Animal Days Incorporated operates a kennel designed to board and pamper up to 10 household cats and dogs while the pet owners are away. Pet owners pay a per-day fee. Variable indirect costs for the company include food, shampoo, and other miscellaneous supplies. Remaining expenses such as indirect labour, amortization, and rent are classified as fixed costs. Both variable and fixed costs are allocated to each pet based on the number of days the animal is with Animal Days. The following information was budgeted for March:

Required:
1. Compute the variable overhead spending and efficiency variances and indicate whether each is favourable or unfavourable.
2. What factors might have caused the variable overhead spending variance? What factors might have caused the variable overhead efficiency variance?
3. Compute the fixed overhead spending variance and the fixed overhead volume variance and indicate whether each is favourable or unfavourable.
4. If fixed overhead is fixed, how could a company have a fixed overhead spending variance? Why might a company have a fixed overhead volume variance?

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Animal guest days (10 animals × 31 days x 90 percent occupancy) Variable overhead cost per guest day Fixed overhead rate per guest day Actual results for March are as follows: Animal guest days Variable overhead cost per guest day Fixed overhead rate per guest day 279 $14.00 $21.00 252 $15.15 $22.95