Reference no: EM132972396

Question - Grand Fender uses a standard cost system and provide the following information:

Static budget variable overhead $3,600

Static budget fixed overhead $ 24,000

Static budget direct labor hours 600 hours

Static budget number of units 30,000 units

Standard direct labor hours 0.020 hours per fender

Grand Fender allocates manufacturing overhead to production based on standard direct labor hours. Grand Fender reported the following actual results for 2024: actual number of fenders produced, 20,000; actual variable overhead, $5,200; actual fixed overhead, $27,000?; actual direct labor hours, 370.

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.

Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (You may need to simply the formula based on the data provided. Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity; VOH = variable overhead.)

2. Explain why the variances are favorable or unfavorable.