I. Variable Overhead Variances The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing overhead. The firm traces all direct costs to products, and it assigns overhead based on direct labor hours.
The company budgeted $15,000 variable overhead and 2,500 direct labor hours to manufacture 5,000 pairs of boots in March 2010.
The factory spent 2,700 direct labor hours in March 2010 to manufacture 4,800 pairs of boots and spent $15,600 on variable overhead during the month.
II. Fixed Overhead Variances (Continuation of Exercise 1) For March 2010 the Platter Valley factory of Bybee Industries budgeted $90,000 of fixed overhead. Its practical capacity is 2,500 direct labor hours per month (to manufacture 5,000 pairs of boots).
The factory spent 2,700 direct labor hours in March 2010 to manufacture 4,800 pairs of boots.
The actual fixed overhead incurred for the month was $92,000.
Two-Variance Analysis of the Factory Overhead Variance (Continuation of Exercises I and II) The Platter Valley factory of Bybee Industries uses a two-variance analysis of the total fac- tory overhead variance.
Required
1. Use the data given in Exercises I and II to compute the total flexible-budget variance and the production-volume variance for March.
2. Use your answers for Requirement 1 of Exercises I and II and determine the flexible-budget variance and the production-volume variance for March.
3. What information is contained in each of the variances in a two-variance breakdown of the total over- head variance?