Question

Sharp Company manufacturers jeans. In June, Sharp made 1200 pairs of jeans, but had budgeted production at 1400 pairs of jeans. The allocation base for overhead costs is direct labor hours. The following additional data is available for the month:

Variable overhead cost standard $0.60 per DLHr

Direct labor efficiency standard 2.00 DLHr per jean

Actual amount of direct labor hours 2520 DLHr

Actual cost of variable overhead $1512

Fixed overhead cost standard $0.25 per DLHr

Budgeted fixed overhead $700

Actual cost of fixed overhead $750

Calculate total variable overhead variance and total fixed overhead variance, show work.

Answer 1

Actual production:1200 units
Std labour hours for actual output: (1200*2): 2400 hours
Std Variable Ohh rate per hour: $ 0.60 per DH
Actual variable OH: $ 1512
Variable OH variance: Std labor hours*Std OH rate -Actual Variable OH
		2400*0.60 - 1512 = 4 72 unfavorable
Std fixed OH rate per hour: 0.25 per DLH
Actual Fixed Oh incurred: $ 750
Fixed OH variance: Std labour hours*Std OH rate per hour - Actual fixed OH
		2400 *0.25 -750 = $ 150 unfavorable