Eastern Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours. The denominator activity level is 60,000 direct labor-hours, or 300,000 units. A standard cost card for the company's product follows:
Actual data for the year follow:
Required:
a.Compute the variable overhead rate and efficiency variances.
b. Compute the fixed manufacturing overhead budget and volume variances.

a. Variable overhead variances:
Variable overhead rate variance = (Actual hours × Actual rate) − (Actual hours × Standard rate)
= $327,240 − (64,800 direct labor-hours × $5.00 per direct labor-hour)
= $327,240 − $324,000
= $3,240 Unfavorable
Variable overhead efficiency variance = (Actual hours − Standard hours) × Standard rate
= (64,800 direct labor-hours − 66,000 direct labor-hours*) × $5.00 per direct labor-hour
= (−1,200 direct labor-hours) × $5.00 per direct labor-hour
= $6,000 Favorable
* 330,000 units × 0.20 direct labor-hour per unit = 66,000 direct labor-hours
b. Fixed overhead variances:
Budget variance = Actual fixed manufacturing overhead − Budgeted fixed manufacturing overhead
= $612,000 − $600,000
= $12,000 Unfavorable
Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours − Standard hours allowed for the actual output)
= $10.00 per direct labor-hour × (60,000 direct labor-hours − 66,000 direct labor-hours)
= $10.00 per direct labor-hour × (−6,000 direct labor-hours)
= $60,000 Favorable