The Condensed Flexible Budget of the Evergreen Company for the Year

Essay

The condensed flexible budget of the Evergreen Company for the year is given below:
Direct labor-hours
The company produces a single product that requires 2.5 direct labor-hours to complete.The direct labor wage rate is $7.50 per hour.Three yards of raw material are required for each unit of product,at a cost of $5 per yard.Assume that the company chooses 50,000 direct labor-hours as the denominator level of activity,but actually worked 48,000 hours during the year,producing 18,500 units.Actual overhead costs for the year are: $$\begin{array} { | l | r | } \hline \text { Variable costs } & \$ 124,800 \\\hline \text { Fixed costs } & \underline { 321,700 } \\\hline \text { Total overhead costs } & \underline { \$ 446,500 }\\\hline\end{array}$$
Required:
(Be sure to indicate whether the variances are favorable or unfavorable. )
a.Compute the variable overhead price variance and the variable overhead efficiency variance.b.Compute the fixed overhead spending (budget)variance and the production volume variance.