E8-17 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... 9,000 units Direct labor hours used ..... 18,500 hours Factory overhead incurred for: Variable costs.... $28,500 Fixed costs $52,000 a. Calculate the flexible-budget variance. b. Calculate the production-volume variance. C. Was the total factory overhead under- or overapplied? By what amount