Problem - Sedona Company set the following standards cost for one unit of its product for 2015.
Direct material (20 lbs. @ $3.70 per lb.) - $74.00
Direct labor (10 hrs. @ $8.80 per hr.) - 88.00
Factory variable overhead (10 hrs. @ $4.20 per hr.) - 42.00
Factory fixed overhead (10 hrs. @ $2.30 per hr.) - 23.00
Standard cost - $227.00
The $6.50 ($4.20 + $2.30) total overhead rate per direct labor hour is based on an expected operating level equal to 70% of the factory's capacity of 62,000 units per month. The following monthly flexible budget information is also available.
|
Flexible Budget
|
Operating Levels (% of capacity)
|
|
65%
|
70%
|
75%
|
|
Budgeted output
|
40,300
|
43,400
|
46,500
|
|
Budgeted labor (standard hours)
|
403,000
|
434,000
|
465,000
|
|
Budgeted overhead (dollars)
|
|
|
|
|
Variable overhead
|
$1,692,600
|
$1,822,800
|
$1,953,000
|
|
Fixed overhead
|
998,200
|
998,200
|
998,200
|
|
Total overhead
|
$2,690,800
|
$2,821,000
|
$2,951,200
|
During the current month, the company operated at 65% of capacity, employees worked 389,000 hours, nd the following actual overhead costs were incurred.
Variable overhead costs - $ 1,650,000
Fixed overhead costs - 1,048,000
Total overhead costs - $2,698,000
Required -
(1) Compute the predetermined overhead application rate per hour for variable overhead, fixed overhead, and total overhead at 70% of capacity.
(2) Compute the total variable and total fixed overhead variances.