Jackson Company's overhead rate was based on estimates of $200,000 for overhead costs and 20,000 direct labour hours. Jackson's standards allow two hours of direct labour per unit produced. Production in May was 900 units, and actual overhead incurred in May was $19,000. The overhead budgeted for 1,800 standard direct labour hours is $17,600 ($5,000 fixed and $12,600 variable).
Instructions
(a) Calculate the total, budget, and volume variances for overhead.
(b) What are possible causes of the variances calculated in part (a)?