Carol’s Cookies expected to use 0.20 direct labor hours to produce 1 unit (batch) of product, and the variable overhead rate is $3.50 per hour. Actual results are in for last year, which indicates 390,000 batches of cookies were produced and sold. The company’s direct labor workforce worked 97,500 hours, and variable overhead costs totaled $360,000.
1. Calculate the variable overhead spending and efficiency variances using the format shown in .
2. Suggest several possible reasons for the variable overhead spending and efficiency variances.