Reference no: EM13938922

The Milling Department uses standard machine hours to allocate overhead to products. Budgeted volume for the year was 36,000 machine hours. A flexible budget is used to set the overhead rate. Fixed overhead is budgeted to be $720,000 and variable overhead is estimated to be $10 per machine hour.
During the year, two products are milled. The following table summarizes operations.

Product 1

Units milled 10,500
Standard machine per unit 2
Actual machine hours used 23,000

Product 2

Units milled 12,000
Standard machine per unit 1
Actual machine hours used 13,000
Actual overhead during the year was $1.1 million.

Calculate all the relevant overhead variances for the department, and write a memo that describes what each one means.