Reference no: EM132836109

Problem - World Company expects to operate at 80% of its productive capacity of 67,500 units per month. At this planned level, the company expects to use 32,400 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.600 direct labor hour per unit. At the 80% capacity level, the total budgeted cost includes $68,040 fixed overhead cost and $408,240 variable overhead cost. In the current month, the company incurred $472,000 actual overhead and 29,400 actual labor hours while producing 51,000 units.

Required -

(1) Compute the overhead volume variance. Classify each as favorable or unfavorable.

(2) Compute the overhead controllable variance. Classify each as favorable or unfavorable.