The Atlas Company Has Developed Standard Overhead Costs Based Upon

Essay

The Atlas Company has developed standard overhead costs based upon a capacity of 180,000 direct labor hours: $$\begin{array} { | l | l | } \hline \text { Standard costs per unit: } & \\\hline \text { Variable portion } & 2 \text { hours } @ \$ 3 = \$ 6 \\\hline \text { Fixed portion } & 2 \text { hours } @ \$ 5 = \underline{ 10 } \\\hline & \$ 16 \\\hline\end{array}$$
During April,85,000 units were scheduled for production;however,only 80,000 units were actually produced.The following data relate to April:
Actual direct labor cost incurred was $644,000 for 165,000 actual hours of work.Actual overhead incurred totaled $1,378,000;$518,000 variable and $860,000 fixed.All inventories are carried at standard cost.Required:
(Be sure to indicate whether the variances are favorable or unfavorable. )
a.Compute the variable overhead price variance.b.Compute the variable overhead efficiency variance.