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Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 122,000 units requiring 488,000 direct labor hours. (Practical capacity is 508,000 hours.) Annual budgeted overhead costs total \$766,160, of which \$551,440 is fixed overhead. A total of 119,100 units using 486,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were \$240,400, and actual fixed overhead costs were \$555,300. Required: 1. Compute overhead variances using a two-variance analysis. Budget Variance \$fill in the blank 1 Unfavorable  Volume Variance \$fill in the blank 3 Unfavorable  2. Compute overhead variances using a three-variance analysis. Spending Variance \$fill in the blank 5 Unfavorable  Efficiency Variance \$fill in the blank 7 Unfavorable  Volume Variance \$fill in the blank 9 Unfavorable

Overhead Variances, Two- And Three-Variance Analyses

Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 122,000 units requiring 488,000 direct labor hours. (Practical capacity is 508,000 hours.) Annual budgeted overhead costs total \$766,160, of which \$551,440 is fixed overhead. A total of 119,100 units using 486,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were \$240,400, and actual fixed overhead costs were \$555,300.

Required:

1. Compute overhead variances using a two-variance analysis.

 Budget Variance \$fill in the blank 1 Unfavorable Volume Variance \$fill in the blank 3 Unfavorable

2. Compute overhead variances using a three-variance analysis.

 Spending Variance \$fill in the blank 5 Unfavorable Efficiency Variance \$fill in the blank 7 Unfavorable Volume Variance \$fill in the blank 9 Unfavorable
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