#6

Sedona Company set the following standard costs for one unit of its product for this year. Direct material (15 pounds @ $3.20 per pound) Direct labor (10 hours @ $9.50 per DLH) Variable overhead (10 hours @ $4.60 per DLH) Fixed overhead (10 hours @ $2.20 per DLH) Standard cost per unit $ 48.00 95.00 46.00 22.00 $ 211.00 The $6.80 ($4.60 - $2.20) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 42,000 units, which is 75% of the factory's capacity of 56,000 units per month. The following monthly flexible budget information is available. Operating Levels (% of capacity) 70% 75% 80% 39,200 42,000 44,800 392,000 W 420,000 448,000 Flexible Budget Budgeted production (units) Budgeted direct labor (standard hours) Budgeted overhead Variable overhead Fixed overhead Total overhead $ 1,803,200 924,000 $ 2,727,200 $ 1,932,000 924,000 $ 2,856,000 $ 2,060,800 924,000 $ 2,984,800 During the current month, the company operated at 70% of capacity, direct labor of 371,000 hours were used, and During the current month, the company operated at 70% of capacity, direct labor of 371,000 hours were used, and the following actual overhead costs were incurred. Actual variable overhead Actual fixed overhead Actual total overhead $ 1,716,000 1,015,200 $ 2,731,200 Exercise 8-27A (Algo) Computing total variable and fixed overhead variances LO P5 1. Compute the total variable overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by selecting favorable, unfavorable, or no variance.) 2. Compute the total fixed overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by selecting favorable, unfavorable, or no variance.) Predetermined OH Rate Standard DL Hours --------At 70% of Operating Capacity---- Overhead Costs Actual Results Variance Applied Favorable/Unfavorable $ 4.60 Variable overhead applied Fixed overhead applied 2.20 Total overhead variance $ 6.80