Reference no: EM132548261

Nina Garcia is the newly appointed president of Laser Products. She is examining the May 2017 results for the Aerospace Products Division. This division manufactures solar arrays for satellites. Garcia's current concern is with manufacturing overhead costs at the Aerospace Products Division. Both variable and fixed overhead costs are allocated to the solar arrays on the basis of laser-cutting-hours.

The following budget information is available:

Budgeted variable overhead rate $200 per hour

Budgeted fixed overhead rate $240 per hour

Budgeted laser-cutting time per solar array 1.5 hours

Budgeted production and sales for May 2017 5,000 solar arrays

Budgeted fixed overhead costs for May 2017 $1,800,000

Actual results for May 2017 are as follows:

Solar arrays produced and sold 4,800 units

Laser-cutting-hours used 8,400 hours

Variable overhead costs $1,478,400

Fixed overhead costs $1,832,200

Required

Question 1. Compute the spending variance and the efficiency variance for variable overhead.

Question 2. Compute the spending variance and the production-volume variance for fixed overhead.

Question 3. Give two explanations for each of the variances calculated in requirements 1 and 2.