Question 23.5: A manufacturing company uses standard costs and reports the ...

Fundamental Accounting Principles

A manufacturing company uses standard costs and reports the information below for January. The company uses machine hours to apply overhead, and the standard is two machine hours per finished unit.
Compute the total overhead cost variance, overhead controllable variance, and overhead volume variance for January. Indicate whether each variance is favorable or unfavorable.

Predicted activity level . . . . . . . . . . . . . . .	1,500 units
Variable overhead rate budgeted . . . . .	$2 .50 per machine hour
Fixed overhead budgeted . . . . . . . .	$6,000 per month ($2 .00 per machine hour at predicted activity level)
Actual activity level . . . . . . . . . . . . . . . . . .	1,800 units
Actual overhead costs . . . . . . . . . . . . . . .	$15,800

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