#21

A company's total overhead rate of $3.90 per direct labor hour (DLH) is based on a predicted activity level of 5,135 units (65% of capacity). The standards for producing one unit are: Variable overhead, 20 hours @ $2.80 per DLH; and Fixed overhead, 20 hours @ $1.10 per DLH. During the current period, the company operated at 60% capacity, and incurred actual variable overhead costs of $259,860 and actual fixed overhead costs of $118,890. Flexible overhead budget information follows. Operating Levels (% of capacity) Flexible Overhead Budget 60% 65% Budgeted production (units) 4, 740 5, 135 Budgeted direct labor (standard hours) 94, 800 102, 700 Budgeted overhead costs Variable overhead $ 265, 440 $ 287 , 560 Fixed overhead 112, 970 112, 970 Total overhead $ 378, 410 $ 400 , 530 1. Compute the total fixed overhead variance. Indicate whether it is favorable or unfavorable. 2. Compute the total variable overhead variance. Indicate whether it is favorable or unfavorable. Note: Indicate the effect of each variance by selecting favorable, unfavorable, or no variance. Standard Standard Overhead Variances at 60% Overhead Overhead Favorable or Direct Labor Overhead Actual of Operating Capacity Rate per DLH Overhead Variance Unfavorable Hours Applied Fixed overhead variance Variable overhead variance