The Matten Company Has Developed Standard Overhead Costs Based Upon

Essay

The Matten Company has developed standard overhead costs based upon a capacity of 180,000 direct labor hours: $$\begin{array} { | l | l | r | } \hline \text { Standard costs per unit: } & & \\\hline \text { Variable portion } & 2 \text { hours } @ \$ 3 = & \$ 6 \\\hline \text { Fixed portion } & 2 \text { hours } @ \$ 5 = & \underline { 10} \\\hline & & \$ 16 \\\hline\end{array}$$
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 fixed overhead spending (budget)variance.b.Compute the production volume variance.