Computing a total overhead variance, a budget variance, and a volume variance. Wilkinson, Inc., uses a standard cost system. The manufacturing overhead standard rate of $6 per unit of its product is based on a normal yearly volume of 100,000 units, requiring 20,000 direct labor hours, and on normal budgeted costs at that volume as shown.

During the month of May 19X1, the company produced 8,200 units of its product, requiring 1,700 direct labor hours. Actual manufacturing overhead costs for the month included fixed costs of $16,667 and variable costs of $33,260.
Instructions 1. Compute the total variance between the actual and standard overhead costs for the month of May. Round off amounts to the nearest dollar. Show whether the variances are favorable (F) or unfavorable (U).
2. Divide the variance into its parts—a budget variance and a volume variance.

Transcribed Image Text:

Fixed Costs $200,000 Variable Costs Total 400,000 $600,000