Reference no: EM132735103

Zeta, Inc., produces handwoven rugs. Budgeted production is 5,000 rugs per month, and the standard direct labor required to make each rug is 2 hours. All overhead is allocated based on direct labor hours. Zeta's manager is interested in what caused the recent month's $3,000 unfavorable overhead variance.

The following information was available to aid in the analysis.

                                     Budgeted Amounts               Actual Results

Production in units          5,000                                    4,500
Total labor hours             10,000                                  9,000
Total variable overhead      $60,000                             $55,000
Total fixed overhead            40,000                              38,000
Total overhead                   $100,000                            $93,000

Problem a. What was the overhead spending variance for the month?

Problem b. What was the overhead volume variance?