The Following Information Relates to the Month of April for the Kennedy

question 81

Essay

The following information relates to the month of April for The Kennedy Manufacturing Company, which uses a standard cost accounting system.
$\begin{array}{lrr}\text {Actual total direct labor}&\$43,400\\\text {Actual direct labor hours used}&14,000\\\text {Standard hours allowed for actual output}&15,000\\\text { Variable overhead price variance - unfavorable }&\$1,400\\\text { Actual total overhead } & \$ 32,000 \\\text { Budgeted fixed costs } & \$ 9,000 \\\text { Normal activity in hours } & 12,00 \\\text { Total overhead application rate per DLH } & \$ 2.25\end{array}$

Required:
(Be sure to indicate whether the variances are favorable or unfavorable.)
a. What is the variable overhead efficiency variance?
b. What is the fixed overhead spending variance?
c. What is the fixed production volume variance?

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Definitions:

Market Output

The total quantity of goods or services produced and offered for sale in a particular market.

Barriers To Entry

Obstacles that make it difficult for new competitors to enter a market, such as high startup costs or stringent regulations.

Natural Monopoly

A market condition where a single firm can supply a good or service to an entire market at a lower cost than two or more firms, due to economies of scale.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs.