Orlanda Manufacturing Company uses a standard cost accounting system to account for the manufacture of exhaust fans. In July 2010, it accumulates the following data relative to 1,500 units started and finished.

Manufacturing overhead was applied on the basis of direct labor hours. Normal capacity for the month was 2,800 direct labor hours. At normal capacity, budgeted overhead costs were \(\$ 20\) per labor hour variable and \(\$ 11\) per labor hour fixed. Total budgeted fixed overhead costs were \(\$ 30,800\).
Jobs finished during the month were sold for \(\$ 240,000\). Selling and administrative expenses were \(\$ 25,000\).
Instructions:

(a) Compute all of the variances for (1) direct materials and (2) direct labor.

(b) Compute the total overhead variance.

(c) Prepare an income statement for management showing variances. Ignore income taxes.

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Cost and Production Data Actual Standard Raw materials Units purchased 17,500 Units used 17,500 18,000 Unit cost Direct labor $3.40 $3.00 Hours worked 2,900 3,000 Hourly rate $11.80 $12.50 Manufacturing overhead Incurred $87,500 Applied $93,000