Budget Variance for Individual Costs. Suzi Greenberg, manager of the Machining Department at Mayfield Industries, Inc. has estimated overhead costs for August at an expected operating level of 6,000 machine hours. Past experience indicates a rate of cost variability per hour as follows:

\section*{Required:}
1. Prepare a budget of overhead costs for 5,000 machine hours.
2. Compare the actual overhead costs with the budget for 5,000 machine hours.
Show budget variances for each item.
3. Explain what factors could cause the budget variance to occur.

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Lubrication Supplies. Power.... Repairs Maintenance Costs that are fixed for the month are budgeted as follows: Supervision.... Indirect labor Heat and light.. Taxes and insurance Depreciation $.75 .30 .25 .50 .80 $ 4,500 11,500 3,200 1,600 1,800 During the month of August, the department worked 5,500 hours and pro- duced the quantity of product that should have been produced in 5,000 hours. The department incurred the following overhead costs: