(AlCPA) Understanding overhead variance relationships Strayer Company uses a stan- dard costing system. For the year just completed Strayer had budgeted the following:

The company expected no beginning or ending inventories. Actual results for Strayer Company showed production and sales of 19,200 units. Total actual factory overhead was exactly equal to budgeted factory overhead, and there was underapplied total factory overhead of $2,000 for the year. Overhead is applied to production based on standard direct labor hours. There was a favorable direct labor efficiency variance but no labor rate variance. There were no direct material variances for the year.

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Unit sales Sales revenue..... 20,000 $200,000 Total production costs 130,000 Gross margin...... 70,000