Erie Co Uses Machine Hours to Apply Standard Overhead Cost to to Production

Essay

Erie Co. uses machine hours to apply standard overhead cost to production. The following data pertain to October: $\begin{array}{lr}\text { Master budget data: } & \\\text { Units } & 100,500 \\\text { Total machine hours (denominator volume) } & \$ 250,000 \\\text { Total variable overhead cost } & \$ 50,000\\\text { Actual operating results: }\\\text { Variable overhead cost incurred } & \$ 265,000 \\\text { Fixed overhead cost incurred } & \$ 54,000 \\\text { Units manufactured } & 2,250 \\\text { Total machine hours } & 96,000\end{array}$ Required:
Compute the following variances using machine hours as the activity variable used to assign standard overhead costs to production. Show calculations.
1. Variable overhead spending variance
2. Variable overhead efficiency variance
3. Fixed overhead spending variance
4. Fixed overhead production-volume variance