EXERCISE 11-14 (20 MINUTES)

3. Variable overhead spending variance:

Variable overhead spending variance = (AH × AR) – (AH × SR)

($185,600) – (64,000 hours × $3 per hour) = $6,400 F

Variable overhead efficiency variance:

Variable overhead efficiency variance = SR (AH – SH)

$3 per hour (64,000 hours – 63,000 hours) = $3,000 U

The fixed overhead variances would be as follows:

Actual Fixed

Overhead Cost Budgeted Fixed

Overhead Cost Fixed Overhead Cost Ap-

plied to Work in Process

$302,400 $300,000* 63,000 hours × $5 per hour

= $315,000

↑ ↑ ↑

Budget Variance,

$2,400 U Volume Variance,

$15,000 F

*As originally budgeted. This figure can be expressed as: