Reference no: EM133055071

Question - Grand Fender uses a standard cost system and provides the following information:

Standard budget variable overhead: $5,630

Static budget fixed overhead: $22,520

Static budget direct labor hours: 563 hours

Static budget number of units: 21,000 units

Standard direct labor hours: 0.026 hours per fender

Grand Fender allocates manufacturing overhead to production based on standard direct labor hours. Grand Fender reported the following actual results for 2016: actual number offenders produced, 20,000; actual variable overhead, $5200; actually fixed overhead, $24,000; actual direct labor hours, 480.

Requirements -

1) Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.

2) Explain why the variances are favorable or unfavorable.