# Variances: Variable and Fixed

11-25

Starlight Glassware Company has the following standards and flexible budget data.

Standard variable overhead rate $18.00 per direct labor hour

Standard quantity of direct labor 2 hours per unit of output

Budgeted fixed overhead $300,000

Budgeted output 25,000 units

Actual results for February are as follows:

Actual output 20,000 units

Actual variable overhead $960,000

Actual fixed overhead $291,000

Actual direct labor 50,000 hours

Use the variance formulas to compute the following variances. Indicate whether each variance is favorable or unfavorable, where appropriate.

1. Variable overhead spending variance

2. Variable overhead efficiency variance

3. Fixed overhead budget variance

4. Fixed overhead volume variance

https://brainmass.com/business/accounting/variances-variable-fixed-90925

#### Solution Preview

Variable overhead spending variance = Actual variable overhead incurred - Flexible budget for variable overhead at actual hours

Spending variance = $960,000 - 50,000 * $18.00 = $960,000 - $900,000 = $60,000 (unfavorable)

Variable overhead efficiency variance = ...

#### Solution Summary

This solution looks at variances: variable overhead spending/efficiency, fixed overhead budget/volume.