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Sedona Company set the following standard costs for one unit of its product for this year. Direct material (20 pounds @ $2.50 per pound)

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Sedona Company set the following standard costs for one unit of its product for this year. Direct material (20 pounds @ $2.50 per pound) Direct labor (10 hours @ $22.00 per DLH) $ 50.00 220.00 Variable overhead (10 hours @ $4.00 per DLH) Fixed overhead (10 hours @ $1.60 per DLH) Standard cost per unit 40.00 16.00 $ 326.00 The $5.60 ($4.00 +$1.60) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 37,500 units, which is 75% of the factory's capacity of 50,000 units per month. The following monthly flexible budget information is available. Flexible Budget Budgeted production (units) Budgeted direct labor (standard hours) Budgeted overhead Variable overhead Fixed overhead Total overhead Operating Levels (% of capacity) 70% 35,000 350,000 $ 1,400,000 600,000 $ 2,000,000 75% 37,500 375,000 $ 1,500,000 600,000 $2,100,000 80% 40,000 400,000 $1,600,000 600,000 $ 2,200,000 During the current month, the company operated at 70% of capacity, direct labor of 340,000 hours were used, and the following actual overhead costs were incurred. Actual variable overhead Actual fixed overhead Actual total overhead $ 1,375,000 628,600 $ 2,003,600 Exercise 8-27A (Static) Computing total variable and fixed overhead variances LO P5 1. Compute the total variable overhead variance and identify it as favorable or unfavorable. Note: Indicate the effect of the variance by selecting favorable, unfavorable, or no variance. 2. Compute the total fixed overhead variance and identify it as favorable or unfavorable. Note: Indicate the effect of the variance by selecting favorable, unfavorable, or no variance. -At 70% of Operating Capacity-------- Standard Direct Labor Hours Favorable or Overhead Rate Standard Direct Labor Hours Standard Overhead Applied Unfavorable Actual Overhead Overhead Variance Variable overhead variance Fixed overhead variance $ 4.00 1.60 628,600

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