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Overhead Variances

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