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Question - Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 121,500 units requiring 486,000 direct labor hours. (Practical capacity is 506,000 hours.) Annual budgeted overhead costs total $758,160, of which $544,320 is fixed overhead. A total of 119,500 units using 484,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $240,400, and actual fixed overhead costs were $556,200.
Required -
1. Compute overhead variances using a two-variance analysis.
2. Compute overhead variances using a three-variance analysis.
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