Walker Corporation is a distributor of several products. They use a predetermined variable overhead rate based on direct labor hours. In the most recent month, 90,000 items were shipped to customers using 3,500 direct labor hours. The company incurred a total of $12,600 in variable overhead costs. According to the company’s standards, 0.04 direct labor hours are required to fulfill an order for one item and the variable overhead rate is $3.50 per direct labor hour.
a. What is the variable overhead spending variance? Show computations.
b. What is the variable overhead efficiency variance? Show computations.
