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Overhead Variances
At the beginning of the year, Lopez Company had the following standard cost sheet for one of its chemical products:
| Direct materials (4 lbs. @ $2.80) | $11.20 |
| Direct labor (2 hrs. @ $18.00) | 36.00 |
| FOH (2 hrs. @ $5.20) | 10.40 |
| VOH (2 hrs. @ $0.70) | 1.40 |
| Standard cost per unit | $59.00 |
Lopez computes its overhead rates using practical volume, which is 90,000 units. The actual results for the year are as follows:
Units produced: 88,000
Direct labor: 170,000 hours at $18.30
FOH: $930,000
VOH: $125,000
Compute the variable overhead spending and efficiency variances.
| Spending variance | $ | Unfavorable |
| Efficiency variance | $ | Favorable |
2. Compute the fixed overhead spending and volume variances.
| Spending variances | $ | Unfavorable |
| Volume variances | $ | Favorable |
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