Question

the Lee company reported the following overhead variances for an accounting period

overhead spending variance $2400 credit

overhead volume variance 1600 debit

a. what was the Lee's total overhead variance for a period?

b. Was Lee's production above or below expected volume ?

Answer 1

overhead spending variance	$ 2400	credit	Favourable
overhead volume variance	$ 1600	debit	Unfavourable

.

(a)

overhead volume variance = overhead spending variance + total overhead variance

Therefore,

total overhead variance

= overhead volume variance - overhead spending variance = -1,600 - 2,400 = -4,000

total overhead variance = $4,000 Unfavourable

(b) Lee's production is below the expected volume because of which overhead volume variance is unfavourable.