Reference no: EM131604714
Problem - Sedona Company set the following standards cost for one unit of its product for 2015.
Direct material (20 lbs. @ $3.70 per lb.) - $74.00
Direct labor (10 hrs. @ $8.80 per hr.) - 88.00
Factory variable overhead (10 hrs. @ $4.20 per hr.) - 42.00
Factory fixed overhead (10 hrs. @ $2.30 per hr.) - 23.00
Standard cost - $227.00
The $6.50 ($4.20 + $2.30) total overhead rate per direct labor hour is based on an expected operating level equal to 70% of the factory's capacity of 62,000 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%
|
|
Budgeted output
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40,300
|
43,400
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46,500
|
|
Budgeted labor (standard hours)
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403,000
|
434,000
|
465,000
|
|
Budgeted overhead (dollars)
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|
|
|
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Variable overhead
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$1,692,600
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$1,822,800
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$1,953,000
|
|
Fixed overhead
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998,200
|
998,200
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998,200
|
|
Total overhead
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$2,690,800
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$2,821,000
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$2,951,200
|
During the current month, the company operated at 65% of capacity, employees worked 389,000 hours, nd the following actual overhead costs were incurred.
Variable overhead costs - $ 1,650,000
Fixed overhead costs - 1,048,000
Total overhead costs - $2,698,000
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.