Jefferson Corporation Uses a Standard Cost System, Applying Manufacturing Overhead $\$ 1,085,000$

Jefferson Corporation uses a standard cost system, applying manufacturing overhead on the basis of machine hours. The company's overhead standards per unit are as follows: (i) variable overhead: 4 hours at $9 per hour (ii) fixed overhead at $6* per hour. The fixed overhead is based upon a planned monthly activity of 120,000 machine hours. Actual data for May were:
Number of units produced: 29,000
Number of machine hours worked: 125,000
Variable overhead costs incurred: $\$ 1,085,000$
Fixed overhead costs incurred: $\$ 755,000$ Required:
A. Calculate the spending and efficiency variances for variable overhead.
B. Calculate the budget and volume variances for fixed overhead.

Correct Answer:

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A. Spending variance: $1,085,000 - (125,...

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