Corey uses a standard cost system and flexible budgets. The following flexible budget was prepared at the 80% operating level for the year:

Standard direct labor hours (DLHs)		28,800
Budgeted variable factory overhead cost	$	149,760
Total factory overhead rate per DLH	$	18.70
Standard DLHs per unit of output		4.0
Excess of actual total overhead cost incurred over the flexible budget (FB) for total overhead based on units produced during the period	$	12,000
Excess of actual fixed overhead cost over budgeted ("lump-sum") fixed overhead cost for the period	$	5,000

 

For purposes of calculating the standard fixed overhead application rate, the company defined the "denominator volume" as the 90% capacity level. As noted above, the standard calls for four DLHs per unit manufactured. During the year, Redtop worked 33,600 DLHs to manufacture 8,500 units. The actual factory overhead cost incurred was $12,000 greater than the flexible-budget amount for the units produced, of which $5,000 was due to fixed factory overhead. 

 

Required:

Calculate (and provide supporting details for) each of the following variances:

1. The standard variable overhead application rate (to two (2) decimal places) per DLH.

2. The variable overhead efficiency variance, to the nearest dollar.

3. The total factory overhead spending variance, to the nearest dollar.

4. The fixed overhead production-volume variance.

5. The variable overhead spending variance.

6. Provide a short description (i.e., interpretation) of each of the variances you calculated in requirements 2 through 5.