Alona Company’s overhead rate was based on estimates of $200,000 for overhead costs and 20,000 direct labor hours

Accounting Jan 19, 2021

Alona Company’s overhead rate was based on estimates of $200,000 for overhead costs and 20,000 direct labor hours. Alona’s standards allow 2 hours of direct labor per unit produced. Production in May was 900 units, and actual overhead incurred in May was $19,000. The overhead budgeted for 1,800 standard direct labor hours is $17,600 ($5,000 fixed and $12,600 variable).

Instructions

(a) Compute the total, controllable, and volume variances for overhead.

(b) What are possible causes of the variances computed in part (a)?

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