Exercise 9.15 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 120,000 units requiring 480,000 direct labor hours. (Practical capacity is 500,000 hours.) Annual budgeted overhead costs total $787,200, of which $556,800 is fixed overhead. A total of 119,400 units using 478,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $230,600, and actual fixed overhead costs were $556,250.

Required:

2. Compute the variable overhead spending and efficiency variances.

Variable Overhead Spending Variance	$	- Select your answer -FavorableUnfavorableItem 6
Variable Overhead Efficiency Variance	$	- Select your answer -FavorableUnfavorableItem 8