Using data given in Exercise 15-36 for Lopez & Co.

In Exercise 15-36, Lopez & Co. uses flexible budgets for cost control. During March, Lopez spent 2,850 machine hours to produce 10,800 units and incurred $13,000 in total factory overhead, of which $4,500 was for fixed factory overhead.

The master budget for the year called for production of 150,000 units using 37,500 machine hours and a total factory overhead of $180,000. The total fixed factory overhead in the annual budget was $60,000.

 

Actual machine hours in March							2,850
Actual units produced in March							10,800
Total factory overhead in March							$ 13,000
Budgeted production in units for the year							150,000
Budgeted machine hours for the year							37,500
Budgeted total factory overhead for the year							$ 180,000
Standard MH per unit produced							0.25
Budgeted fixed factory overhead for the year							$ 60,000

Required

1. Use a three-way breakdown of the total overhead variance to determine the following variance components:

a. Total overhead spending variance.

b. Overhead efficiency variance.

c. Production-volume variance.

2. Use a two-variance breakdown of the total overhead variance to determine the following variance components:

a. Total overhead flexible-budget variance.

b. Production-volume variance.

3. What is the total factory-overhead variance for the month of March?