Nina Garcia is the newly appointed president of Laser Products. She is examining the May 2012results for the Aerospace Products Division. This division manufactures solar arrays for satellites. Garcia’s current concern is with manufacturing overhead costs at the Aerospace Products Division. Both variable and fixed overhead costs are allocated to the solar arrays on the basis of laser-cutting-hours. The following budget information is available:Budgeted variable overhead rate $200 per hourBudgeted fixed overhead rate $240 per hour

Budgeted laser-cutting time per solar array 1.5 hoursBudgeted production and sales for May 2012 5,000 solar arraysBudgeted fixed overhead costs for May 2012 $1,800,000Actual results for May 2012 are as follows:

Solar arrays produced and sold 4,800 units

Laser-cutting-hours used 8,400 hoursVariable overhead costs $1,478,400Fixed overhead costs $1,832,200

Required

1. Compute the spending variance and the efficiency variance for variable overhead.

2. Compute the spending variance and the production-volume variance for fixed overhead.

3. Give two explanations for each of the variances calculated in requirements 1 and 2.

Answer rating: 100% (QA)

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