Question - The budgeted total overhead rate applied to jobs by RANA's COMPUTER SERVICES is $9.50 per labor hour. The fixed overhead for the past year was budgeted at $90,000 while $3.50 per labor hour was the expected variable rate. Rana Computer Services did 20,000 hours of work during the past year. The business owner, Ms.Rana, is concerned that the business may have become inefficient in the control of its overhead costs; because the actual overheads for the year just past were $155,000 which she felt might be a bit high.

Required:

Calculate:

a) the static (master) budgeted total overhead for the year

b) the expected (flexible budget) total overhead for the year

c) the total overhead variance

d) the fixed overhead volume variance

e) Why might Rana feel that the actual overheads might be a bit high?

Comment on the efficient or inefficient control of the overheads.