Question: XYZ Ltd. uses a predetermined overhead rate based on direct labor hours. The budgeted manufacturing overhead costs for the year are $620,000, and the company

XYZ Ltd. uses a predetermined overhead rate based on direct labor hours. The budgeted manufacturing overhead costs for the year are $620,000, and the company expects to use 62,000 direct labor hours. However, actual direct labor hours worked during the year were 59,000. Calculate the overhead volume variance and assess its implications for capacity utilization and cost management. Analyze the factors contributing to the variance, such as production inefficiencies, workforce utilization rates, and changes in demand patterns. Develop recommendations for aligning actual production levels with budgeted capacity to optimize cost performance.

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