Overhead Variances In 19_4 the Howard Company used a predetermined total factory overhead rate of $7 per standard direct-labor hour allowed for product costing. Prior to 19_4 the company had used a normal denominator activity of 80,000 hours (based on average usage over four years) for developing an overhead rate for product costing. In 19_4 this budgetary practice changed, and management decided to use the expected annual activity of 70,000 standard allowed hours as the denominator volume for 19_4. No other changes in cost estimates were anticipated.

Management was conscious that this chosen denominator would incorporate an hourly amount of $.50, which represented a charge for idle capacity.

That is, if the previous normal denominator activity of 80,000 hours had been used, the hourly total overhead application rate would have been lower by $.50.

: The company used a flexible budget for control. The total factory overhead applied for the year 19_4 was $504,000, and the total overhead was overapplied by $6,000.

Compute:

Flexible-budget variance for total overhead.

Denominator variance.