Question

Better Fitness Gear applies overhead on the basis of direct labor hours. Five direct labor hours are required for each unit produced. Planned production for the period was set at 8,000 units. Budgeted fixed manufacturing overhead for the period is budgeted at $20,000 and variable manufacturing overhead is budgeted at $100,000. The 48,500 hours worked during the period resulted in production of 9,500 units. Actual manufacturing overhead cost incurred was $156,000.

Required: Calculate the three overhead variances:

a. Total Spending Variance

b. Total Efficiency Variance

c. Total Volume Variance

d. Proof: Total Factory Overhead Variances

e. Interpret your variances

Answer 1