Question Details

Calculate the variable overhead spending and efficiency variance 




1.Cheshire, Inc. allocates fixed overhead at a rate of $18 per direct labor hour. This amount is based on
90% of capacity or 3,600 direct labor hours for 6,000 units. During May, Cheshire produced 5,500 units.
Budgeted fixed overhead is $66,000, and overhead incurred was $67,000.
Required:
Determine the volume variance for May.



2.Prichard Company has developed the following standard cost data based on 60,000 direct labor hours,
which is 75% of capacity. Fixed overhead is $360,000 and variable overhead is $180,000 at this level of
                                                                                                       	           Per unit
Direct materials (3 lbs. @$2.00/lb.)…………………………….		$  6.00
Direct labor (0.5 hrs. @ $8.00/hr.)………………………………		    4.00
Variable overhead (2hrs.@ $3/hr.)……………………………..	 	    1.50
Fixed overhead (0.5hrs.@ $6/hr.)………………………………..	 	    3.00
Total standard cost ………………………………………………		$14.50

activity.
During the current period, the company operated at 80% of capacity and produced 128,000 units. Actual

Direct materials (380,000 lbs.)……………………………….	$779,000
Direct labor (63,000 hrs.)…………..…………………………	  507,150
Fixed overhead ……………...………………………………..	  365,000
Variable overhead……………………………………………..	  220,000

costs were:
Calculate the variable overhead spending and efficiency variance and the fixed overhead spending and
volume variances. Indicate whether each is favorable or unfavorable.




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