Exercise 9.15 (Algorithmic) Overhead Variances, Four-Variance Analysis

Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 125,000 units requiring 500,000 direct labor hours. (Practical capacity is 520,000 hours.) Annual budgeted overhead costs total $810,000, of which $580,000 is fixed overhead. A total of 119,300 units using 498,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,100, and actual fixed overhead costs were $555,250.

Required:

1. Compute the fixed overhead spending and volume variances.

Fixed Overhead Spending Variance
Fixed Overhead Volume Variance

2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations

Variable Overhead Spending Variance
Variable Overhead Efficiency Variance