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    Overhead Variances

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    E8-6 The following information was taken from the annual manufacturing overhead cost budget of SooTech Company.

    Variable manufacturing overhead costs $33,000
    Fixed manufacturing overhead costs $19,800
    Normal production level in hours 16,500
    Normal production level in units 4,125

    During the year, 4,000 units were produced, 16,100 hours were worked, and the
    actual manufacturing overhead was $54,000. Actual fixed manufacturing overhead
    costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied
    on the basis of direct labor hours.

    a. Compute the total, fixed, and variable predetermined manufacturing overhead rates.

    b. Compute the total, controllable, and volume overhead variances.

    c. Briefly interpret the overhead controllable and volume variances computed
    in (b).

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    Solution Summary

    The solution explains how to calculate overhead variances using the example of SooTech Company