Flexible Budget, Selection of Appropriate Activity Base, and Analysis of VariableOverhead Variances The Selkirk Company has produced 10,000 units of product. The standard direct-labor hours allowed (also called standard hours earned or standard hours worked) were 2 hours per unit, or a total of 20,000 hours. The actual direct-labor hours worked were 21,000. The standard direct-labor rate is $3 per hour. Actual direct-labor costs totaled $65,100. Variable overhead was divided into the following categories:

STANDARD COST INCURRED TYPE OF OVERHEAD ITEM BEHAVIOR PATTERN*
$14,700 Indirect labor—variable $ .70 2,000 Supplies—variable 10 2,200 Repairs—variable 10 2,100 Power—variable 10 $21,000 Total variable overhead $1.00 * Per standard direct-labor hour.
Standard costs applied to production have sometimes been referred to as a function of outputs, whereas actual costs incurred have sometimes been called a function of wnputs. Analyze the variances for direct labor and then comment on your analysis in relation to the outputs-inputs distinction and to the termi- nology distinction between standard hours worked and actual hours worked.®

2. Prepare a detailed performance report for the foreman, showing:
(3) (4) (2) BUDGET (1) ~ 3) ANALYSIS OF (4)
BUDGET BASED BASED TOTAL (1) — (2) (2) — (3) (1) ON 21,000 ON 20,000 BUDGET SPENDING EFFICIENCY INCURRED HOURS HOURS VARIANCE VARIANCE VARIANCE 3. Stee a summary analysis of the total variance for total variable overhead.
were based on the standard hours allowed for good output. Repeat parts 2 and 3, but assume that budget allowances are based solely on actual hours worked (inputs). What would be the total budget variance? Could it be subdivided for further analysis?
5. Compare and contrast the price and efficiency variances of direct labor with the spending and efficiency variances of variable overhead.