Straightforward Computation of Overhead Variances

The following data are the actual results for Marvelous Marshmallow Company for October.

Actual output 9,000 cases

Actual variable overhead


Actual fixed overhead


Actual machine time

40,500 machine hours

Standard cost and budget information for Marvelous Marshmallow Company follows:

Standard variable-overhead rate $9.00 per machine hour Standard quantity of machine hours 4 hours per case of marshmallows Budgeted fixed overhead $120,000 per month Budgeted output 10,000 cases per month


1. Use any of the methods explained in the chapter to compute the following variances.

Indicate whether each variance is favorable or unfavorable, where appropriate.

a. Variable-overhead spending variance.

b. Variable-overhead efficiency variance.

c. Fixed-overhead budget variance.

d. Fixed-overhead volume variance.

2. Build a spreadsheet: Construct an Excel spreadsheet to solve the preceding requirement. Show how the solution will change if the following information changes: actual output was 9,100 cases, and actual variable overhead was $395,000.