Dvent budgets 18,000 machine hours for the production of computer chips in August 2015. The budgeted variable overhead rate is $6 per machine-hour. At the end of August there is a $375 favourable rate variance for variable overhead and a $1,575 unfavourable rate variance for fixed overhead. For the computer chips produced, 14,850 machine-hours are budgeted and 15,000 machine-hours are actually used. Total actual overhead costs are $120,000.
Required
1. Calculate efficiency and flexible-budget variances for Dvent's variable overhead in August 2015. Will variable overhead be overallocated or underallocated? By how much?
2. Calculate production-volume and flexible-budget variances for Dvent's fixed overhead in August 2015. Will fixed overhead be overallocated or underallocated? By how much?