Sedona Company set the following standard costs for one unit of its product for 2008. Exercise 24-6 Computation and interpretation of overhead variances C22 Direct material (20 lbs @ $2.50 per lb)..... ...... Direct labor (10 hrs. @ $8.00 per hr.) .................. Factory variable overhead (10 hrs. $4.00 per hr.) ........ Factory foved overhead (10 hrs. @ $1.60 per hr.) .......... Standard cost $50.00 90.00 40.00 16.00 $186.00 The $5.60 ($4.00 + $1.60) total overhead rate per direct labor hour is based on an expected operating level equal to 75% of the factory's capacity of 50,000 units per month. The following monthly flexible budget information is also available, D FOTO Has Wom IAGRANTWO - 2.A. .. DEB Operating Levels 75% 3 4 5 35,000 350,000 37,500 375,000 890 40,000 400,000 Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dollars) Variable overhead Fixed overhead Total overhead tel 7 $1,400,000 600,000 $2,000,000 $1,500,000 600,000 $2,100,000 $1,600,000 600,000 $2,200,000 During the current month, the company operated at 70% of capacity, employees worked 340,000 hours, and the following actual overhead costs are incurred. Variable overhead costs ....... Fixed overhead costs Total overhead costs.. . $1,375,000 628,600 $2.003.600 Chapter 24 Flexible Budgets and Standard Costs $a3 (1) Show how the company computed its predetermined overhead application rate per hour fortal over. head, variable overhead, and fixed overhead. (2) Compute and interpret the variable overhead spending and efficiency variances, (3) Compute and interpret the fixed overhead spending and volume variances. Check (2) Variable overed Spending $15,000 , Oficiency $40.000 F