Exercise 9.16 (Algorithmic) Overhead Variances, Two- And Three-Variance Analyses

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 124,000 units requiring 496,000 direct labor hours. (Practical capacity is 494,000 hours.) Annual budgeted overhead costs total $758,880, of which $560,480 is fixed overhead. A total of 119,100 units using 494,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $240,200, and actual fixed overhead costs were $555,900.

Required:

1. Compute overhead variances using a two-variance analysis.

Budget Variance	$	- Select your answer -FavorableUnfavorableItem 2
Volume Variance	$	- Select your answer -FavorableUnfavorableItem 4

2. Compute overhead variances using a three-variance analysis.

Spending Variance	$	- Select your answer -FavorableUnfavorableItem 6
Efficiency Variance	$	- Select your answer -FavorableUnfavorableItem 8
Volume Variance	$	- Select your answer -FavorableUnfavorable Item 10