Before operations begin, management has analyzed the market and determined that 500 batches of their secret mixture TREX are budgeted to be produced. Time and motion studies show that 25 standard hours are needed per batch. In their planning for the next period, management budgets manufacturing overhead to be $437,500 of which $250,000 is fixed.

Required:

a. What capacity concept can you determine (i.e., budgeted, actual, or standard)?

b. How many hours is it?

c. In what variance do you use the capacity concept for Requirement a if the company uses the four-variance method? Use calculations to show how it is used.

d. In what variance do you use the $250,000 fixed overhead in total assuming the four-variance method is used?

e. What is the budgeted variable overhead and how do you use it?

f- What is the variable overhead rate per hour and in what variance do you use this rate?