Eastern Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours (DLHs). The denominator activity level is 60,000 direct labor-hours, or 300,000 units.
- A standard cost card for the company's product follows:
|
Standard
quantity or
hours
|
Standard price or
rate
|
Standard
cost
|
|
Direct materials
|
0.25 kilogram
|
$16 per kilogram
|
$4
|
|
Direct labor
|
0.20 DLH
|
$10 per DLH
|
2
|
|
Variable overhead
|
0.20 DLH
|
$5 per DLH
|
1
|
|
Fixed overhead
|
0.20 DLH
|
$10 per DLH
|
2
|
|
Total standard cost
|
|
|
$9
|
- Actual data for the year follow:
|
Units produced and sold
|
330,000
|
|
Actual direct labor-hours worked
|
64,800
|
|
Actual variable manufacturing overhead cost
|
$327,240
|
|
Actual fixed manufacturing overhead cost
|
$612,000
|
Required:
a. Compute the variable manufacturing overhead spending and efficiency variances.
b. Compute the fixed manufacturing overhead budget and volume variances.