Sedona Company set the following standard costs for one unit of its product for 2013.

The $5.60 ($4.00 + $1.60) total overhead rate per direct labor hour is based on an expected operating level equal to 75% of the factory’s capacity of 50,000 units per month. The following monthly flexible budget information is also available.

During the current month, the company operated at 70% of capacity, employees worked 340,000 hours, and the following actual overhead costs were incurred.

(1) Show how the company computed its predetermined overhead application rate per hour for total overhead, variable overhead, and fixed overhead. (2) Compute the total variable and total fixed overhead variances.

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Direct material (20 lbs. @ $2.50 per lb.) Direct labor (10 hrs. @ $8.00 per hr.) Factory variable overhead (10 hrs. @ $4.00 per hr.). Factory fixed overhead (10 hrs. @ $1.60 per hr.) Standard cost $ 50.00 80.00 40.00 16.00 $186.00