Ana Carillo and Associates is a medium-sized company located near a large metropolitan area in the Midwest. The company manufactures cabinets of mahogany, oak, and other fine woods for use in expensive homes, restaurants, and hotels. Although some of the work is custom, many of the cabinets are a standard size.<\/p>
<\/p>
One such non-custom model is called Luxury Base Frame. Normal production is1,000units. Each unit has a direct labor hour standard of5hours. Overhead is applied to production based on standard direct labor hours. During the most recent month, only680units were produced;4,500direct labor hours were allowed for standard production, but only4,000hours were used. Standard and actual overhead costs were as follows.<\/p>
<\/p>
<\/p>
Standard (1,000units); Actual (680units)<\/strong><\/p> Indirect materials $9,700; $9,900<\/p> Indirect labor 34,700; 41,100<\/p> (Fixed) Manufacturing supervisors salaries 18,100; 17,700<\/p> (Fixed) Manufacturing office employees salaries 10,500; 10,100<\/p> (Fixed) Engineering costs 21,800; 20,200<\/p> Computer costs 8,100; 8,100<\/p> Electricity 2,000; 2,000<\/p> (Fixed) Manufacturing building depreciation 6,400; 6,400<\/p> (Fixed) Machinery depreciation 2,400; 2,400<\/p> (Fixed) Trucks and forklift depreciation 1,200; 1,200<\/p> Small tools 600; 1,100<\/p> (Fixed) Insurance 400; 400<\/p> (Fixed) Property taxes 200; 200<\/p> Total $116,100; $120,800<\/p> <\/p> Overhead application rate is $23.22<\/p> <\/p> Applied overhead: $104,490<\/p> <\/p> How do I calculate the volume<\/u> variance in terms of favorable, unfavorable, or neither.<\/p>",
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