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

$1$

$2$

$0$

$,$

$0$

$0$

$0$

$$units

requiring

$4$

$8$

$0$

$,$

$0$

$0$

$0$

$$direct labor hours.

$($

Practical capacity is

$5$

$0$

$0$

$,$

$0$

$0$

$0$

$$hours$.$

$)$

$$Annual

budgeted overhead costs total $

$7$

$8$

$7$

$,$

$2$

$0$

$0$

$,$

$$of which $

$5$

$5$

$6$

$,$

$8$

$0$

$0$

$$is fixed overhead. A total of

$1$

$1$

$9$

$,$

$4$

$0$

$0$

$$units using

$4$

$7$

$8$

$,$

$0$

$0$

$0$

$$direct labor hours were produced during the year. Actual

variable overhead costs for the year were $

$2$

$3$

$0$

$,$

$6$

$0$

$0$

$,$

$$and actual fixed overhead costs were

$

$5$

$5$

$6$

$,$

$2$

$5$

$0$

$.$

Required:

Compute overhead variances using a two

$-$

variance analysis.

Budget Variance

$

$$

Volume Variance

$

Compute overhead variances using a three

$-$

variance analysis.

Spending Variance $

Efficiency Variance

$$

Volume Variance

$

$$