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Question
Abrams, Inc. provides the following results of March's operations:
| Direct materials price variance | $ 400 | F |
| Direct materials quantity variance | 2,000 | U |
| Direct labor rate variance | 100 | U |
| Direct labor efficiency variance | 1,200 | F |
| Variable overhead spending variance | 400 | U |
| Variable overhead efficiency variance | 800 | F |
| Fixed overhead spending variance | 100 | U |
| Fixed overhead volume variance | 600 | F |
Required:
a. Determine the total overhead cost variance for March.
b. Applying the management by exception approach, which of the variances shown are of greatest concern? Why?
c. Assuming the variances are immaterial and we close them to Cost of Goods Sold, what will the effect be on that account of these variances?
Answer
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