Pier Corp. has an expected monthly capacity of 9,000 units but only 5,700 units were produced and 6,000 direct labor hours were used during August 2010 due to a flood in the manufacturing facility. Actual variable overhead for August was $48,165 and actual fixed overhead was $140,220.

Standard cost data follow:

Standard Cost per Unit

(One Unit Takes One Labor Hour)

Direct material .........$9.00

Direct labor .........15.00

Variable overhead ........ 8.00

Fixed overhead .......16.00

Total ........... $48.00

a. Compute and compare the actual overhead cost per unit with the expected overhead cost per unit.

b. Calculate overhead variances using the four-variance method.

c. Explain why the volume variance is so large.