standish company manufactures consumer products and provided the following information for the month of february: units produced 131,200 standard direct labor hours per unit 0.2 standard fixed overhead rate (per direct labor hour) $2.30 budgeted fixed overhead $64,900 actual fixed overhead costs $68,200 actual hours worked 26,450

Variance analysis is the method of determining the differences between the actual and budgeted figures and investigating the reason why such difference occurs.

Part a:

Variable overhead spending variance = Actual hours x (Actual rate - Standard rate)

Variable overhead spending variance = 26,450 x ((Actual variable overhead cost / Actual hours worked)) - $2.30 per direct labor hour)

Variable overhead spending variance = 26,450 x (($68,900 / 26,450 hours)) - $2.30 per direct labor hour)

Variable overhead spending variance = 26,450 x ($2.6049 - $2.30 per direct labour hour)

Variable overhead spending variance = 26,450 x $0.3049

Variable overhead spending variance = $8064.60 unfavourable

Part b:

Variable overhead efficiency variance = Standard rate x (Actual hours - Standard hours based on actual output)

Variable overhead efficiency variance = $2.30 per direct labor hour x (26,450 hours - (units produced x standard direct labor hours per unit))

Variable overhead efficiency variance = $2.30 per direct labor hour x (26,450 hours - (131,200 units x 0.2 direct labor hours per unit)

Variable overhead efficiency variance = $2.30 per direct labor hour x (26,450 hours - 26,240 hours)

Variable overhead efficiency variance = $2.30 per direct labour hour x 210 hours

Variable overhead efficiency variance = $483 unfavourable

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