Question - Sedona Company set the following standard costs for one unit of its product for 2015.
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Direct material (20 lbs. @ $2.10 per lb.)
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$42.00
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Direct labor (10 hrs. @ $8.80 per hr.)
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88.00
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Factory variable overhead (10 hrs. @ $4.00 per hr.)
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40.00
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Factory fixed overhead (10 hrs. @ $1.80 per hr.)
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18.00
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Standard cost
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$188.00
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The $5.80 ($4.00 + $1.80) total overhead rate per direct labor hour is based on an expected operating level equal to 70% of the factory's capacity of 70.000 units per month The following monthly flexible budget information is also available.
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Flexible Budget
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Operating Levels (% of capacity)
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65%
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70%
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75%
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Budgeted output (units)
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45,500
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49,000
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52,500
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Budgeted labor (standard hours)
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455,000
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490,000
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525,000
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Budgeted overhead (dollars)
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|
|
|
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Variable overhead
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$ 1,820,000
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$1,960,000
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$2,100,000
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Fixed overhead
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882,000
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882,000
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882,000
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Total overhead
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$ 2,702,000
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$2,842,000
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$2,982,000
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During the current month, the company operated at 65% of capacity, employees worked 435,000 hours, and the following actual overhead costs were incurred.
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Variable overhead costs
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$1,765,000
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Fixed overhead costs
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943,000
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Total overhead costs
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$2,708,000
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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.