Question 4:

Eric Co. uses machine hours to apply standard overhead cost to production. The following data pertain to October:

Master budget data:
Units		2,500
Total machine hours (denominator volume)		100,000
Total variable overhead cost	$	250,000
Total fixed overhead cost	$	50,000
Actual operating results:
Variable overhead cost incurred	$	265,000
Fixed overhead cost incurred	$	54,000
Units manufactured		2,250
Total machine hours		96,000

Required: Compute the following variances using machine hours as the activity variable used to assign standard overhead costs to production. Show calculations, indicate favorable / unfavorable, and provide a short description (i.e., interpretation) of each of the variances.

1. Variable overhead spending variance

2. Variable overhead efficiency variance

3. Fixed overhead spending variance

4. Fixed overhead production-volume variance.

Please explain and show work. Will rate.