Cornerstones of Managerial Accounting 4th Edition by Maryanne Mowen, Don Hansen, Dan Heitger

Exercise 49

Overhead Application, Fixed and Variable Overhead Variances
Chesley Company is planning to produce 2,600,000 power drills for the coming year. The company uses direct labor hours to assign overhead to products. Each drill requires 0.6 standard hour of labor for completion. The total budgeted overhead was $1,981,200. The total fixed overhead budgeted for the coming year is $1,326,000. Predetermined overhead rates are calculated using expected production, measured in direct labor hours. Actual results for the year are:
Required:
1. Compute the applied fixed overhead.
2. Compute the fixed overhead spending and volume variances.
3. Compute the applied variable overhead.
4. Compute the variable overhead spending and efficiency variances.