E8-16 E8-17 Determining Budgeted Overhead The overhead application rate for a company is $10 per unit, made up of $6 per unit of fixed overhead and $4 per unit of variable over- head. Normal capacity is 10,000 units. In one month there was a favorable flexible budget variance of $2,500. Actual overhead for the month was $110,000 and actual units produced were 13,125. Based on this information, determine the amount of the budgeted overhead for the actual level of production. Calculating factory overhead: two variances Munoz Manufacturing Co. normally produces 10,000 units of prod- uct X each month. Each unit requires 2 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are $2.50 and $1.50 per direct labor hour, respectively. Cost and production data for May follow: Production for the month.... Direct labor hours used Factory overhead incurred for: Variable costs.... Fixed costs. a. Calculate the flexible-budget variance. b. Calculate the production-volume variance. 9,000 units 18,500 hours $28,500 $52,000 c. Was the total factory overhead under- or overapplied? By what amount?