Problem 3: OH Cost Variance Analysis
Jake Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below:
Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60
Fixed overhead (5 hours @ $15* per direct manufacturing labor hour) 75
Total overhead per switch $135
*Based on capacity of 200,000 direct manufacturing labor hours per month.
The following information is available for the month of November:
- 46,000 switches were produced although 40,000 switches were scheduled to be produced.
- 225,000 direct manufacturing labor hours were worked at a total cost of $5,625,000.
- Variable manufacturing overhead costs were $2,750,000.
- Fixed manufacturing overhead costs were $3,050,000.
- Find the variable overhead spending and efficiency variances for November.
The fixed overhead budget variance for November.