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Munoz Manufacturing Co. normally produces 12,000 units of product X each month. Each unit requires 2.5 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are $3.00 and $2.00 per direct labor hour, respectively.
Cost and production data for May follow:
Production for the month 11,000
UNITS Direct labor hours used 22,500 HOURS
Factory overhead incurred for:
Variable costs $33,000
Fixed costs $60,500
Problem a. Calculate the flexible-budget variance.
Problem b. Calculate the production-volume variance.
Problem c. Was the total factory overhead under- or overapplied? By what amount?
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