Budget and Capacity Variances. Revchek Manufacturing bases its factory overhead on the flexible budget cost function of:

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1. Calculate the rates for variable and fixed overhead that would be used to apply overhead to products.
2. Calculate the underapplied or overapplied overhead for the period.
3. Determine the following variances:

(a) Overhead budget variance.

(b) Overhead capacity variance.
4. How much of the budget variance is due to variable costs and how much to fixed costs?

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$33,000+ ($2.40 x direct labor hours) Normal production is based on 12,000 direct labor hours. Standards call for two direct labor hours per unit of completed product. For the current period, the operating results were as follows: Actual direct labor hours worked Units produced....... Actual variable overhead costs Actual fixed overhead costs.. 11,400 5,800 $28,460 $31,950