Bright Spark Ltd is a manufacturer of electrical switchers, and

Bright Spark Ltd is a manufacturer of electrical switchers, and uses a standard costing system standard manufacturing overhead costs per switch are based on direct labour hours and are allows:

Variable overhead (5 hours @ $24 per hour) …………………………………. $ 120

Fixed overhead (5 hours @ $36 per hour)* …………………………………….. 180

Total overhead …………………………………………………………………. $300

* Based on capacity of 300 000 direct labour hours per month.

The following information is available for the month of October:

• 56 000 switches were produced, although 60 000 switches were budgeted.

• 275 000 direct labour hours were worked at a total cost of $7 650 000.

• Variable overhead costs were $7 020 000.

• Fixed overhead costs were $11 250 000.

Required:

Calculate the variable overhead spending and efficiency variances and the fixed overhead budget and volume variance for October. Indicate whether each variance is favourable or unfavourable?

 

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