Acc206 Principles of Accounting: Week 4 Chapter 7 Exercise 5 - Nova Manufacturing

Acc206 Principles of Accounting
Week 4 Assignment - Chapter 6 and 7 Problems

Chapter 7 Exercise 5
5. Overhead variances
Nova Manufacturing applies factory overhead to products on the basis of direct labor hours. At the beginning of the current year, the company's accountant made the following estimates for the forthcoming period:
Estimated variable overhead: 500,000
Estimated fixed overhead: 400,000
Estimated direct labor hours: 40,000
It is now 12 months later. Actual total overhead incurred in the manufacture of 7,900 units amounted to $895,100. Actual labor hours totaled 39,800.

Assuming a direct labor standard of five hours per finished unit, calculate the following:
a. Variable overhead efficiency variance
b. Fixed overhead volume variance
c. Overhead spending variance
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