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Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 180,000 direct-labor hours as follows:
Standard costs per unit (one box of paper):
Variable overhead (2 hours @ $3 per hour) ............ $6
Fixed overhead (2 hours @ $5 per hour) ............. 10
Total $ ..........................$16
During April, 90,000 units were scheduled for production: however, only 80,000 units were actually produced. The following data relate to April.
1. Actual direct-labor cost incurred was $1,567,500 for 165,000 actual hours of work.
2. Actual overhead incurred totaled $1,371,500, of which $511,500 was variable and $860,000 was fixed.
Required:
Prepare two exhibits similar to Exhibits 11-6 and 11-8 in the chapter, which show the following variances, State whether each variance is favorable or unfavorable, where appropriate.
1. Variable-overhead spending variance.
2. Variable-overhead efficiency variance.
3. Fixed-overhead budget variance.
4. Fixed-overhead volume variance.
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