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E23-20 Computing overhead variances Grand Fender is a competitor of Pro Fender from Exercise E23-19. Grand Fender also uses a standard cost system...
E23-20 Computing overhead variances
Grand Fender is a competitor of Pro Fender from Exercise E23-19. Grand Fender also uses a standard cost system and provides the following information:
Static budget variable overhead $ 5,630
Static budget fixed overhead $ 22,520
Static budget direct labor hours 563 hours
Static budget number of units 21,000 units
Standard direct labor hours 0.026 hours per fender
Grand Fender allocates manufacturing overhead to production based on standard direct labor hours. Grand Fender reported the following actual results for 2016: actual number of fenders produced, 20,000; actual variable overhead, $5,200; actual fixed overhead, $24,000; actual direct labor hours, 480.
Requirements
1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
2. Explain why the variances are favorable or unfavorable.
