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The predetermined overhead rate is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150,000 was divided by normal capacity of 30,000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $8,900 variable and $12,000 fixed, and 1,500 units were produced. The direct labor standard is 2 hours per unit produced. The total overhead variance is $1,600 Favorable $700 Unfavorable $5,900 Unfavorable $1,600 Unfavorable $700 Favorable $5,900 Favorable 3 points The standard predetermined overhead rate used in setting the standard overhead cost is determined by dividing actual overhead costs by an expected standard activity index. actual overhead costs by actual activity. budgeted overhead costs by actual activity. budgeted overhead costs by an expected standard activity index