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 $120,000$ 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:

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

Budget Variance

$

$$

Volume Variance

$

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

Spending Variance $

Efficiency Variance $q$

Volume Variance

$

$x$