8) The formula for computing overhead for the Texas Company for the year is given as $160,000 + $1.25/direct labor hour. The company produces a single product that requires 2.5 direct labor-hours to complete.

Assume that the company chooses 100,000 direct labor-hours as the denominator level of activity, but actually worked 96,000 hours during the year producing 37,000 units.

Actual overhead costs for the year are:

Variable costs $ 124,800

Fixed costs 158,800

Total overhead costs $ 283,600

Required: (Be sure to indicate whether the variances are favorable or unfavorable.)

a. Compute the variable overhead price variance and the variable overhead efficiency variance.

b. Compute the fixed overhead spending (budget) variance and the production volume variance

please explain the steps and reasoning behind your answer

The answers are a)4375 unfavorable b) 12000 unfavorable .