9-3 Fundamentals of Overhead Variances The Allen Company has a standard absorption costing and flexible budgeting system. The standard costs of its two products differ slightly because the direct materials are $9.00 higher per unit for Product B. The standard costs for Product A include:

Direct materials, 3 pounds @ $20.00 $60.00 Direct labor, 5 hours @ $10.00 50.00 For budgetary-control purposes, production is expressed in standard hours allowed. Denominator activity is expressed as 20,000 standard direct-labor hours per month. Fixed factory overhead is budgeted at $120,000 per month.