Sedona Company set the following standard costs for one unit of its product for 2017.

Direct material (30 Ibs. @ $2.20 per Ib.)		$	66.00
Direct labor (20 hrs. @ $4.00 per hr.)			80.00
Factory variable overhead (20 hrs. @ $2.20 per hr.)			44.00
Factory fixed overhead (20 hrs. @ $1.10 per hr.)			22.00
Standard cost		$	212.00

The $3.30 ($2.20 + $1.10) total overhead rate per direct labor hour is based on an expected operating level equal to 65% of the factory's capacity of 52,000 units per month. The following monthly flexible budget information is also available.

		Operating Levels (% of capacity)
Flexible Budget			60%				65%				70%
Budgeted output (units)			31,200				33,800				36,400
Budgeted labor (standard hours)			624,000				676,000				728,000
Budgeted overhead (dollars)
Variable overhead		$	1,372,800			$	1,487,200			$	1,601,600
Fixed overhead			743,600				743,600				743,600
Total overhead		$	2,116,400			$	2,230,800			$	2,345,200

During the current month, the company operated at 60% of capacity, employees worked 591,000 hours, and the following actual overhead costs were incurred.

Variable overhead costs		$	1,326,000
Fixed overhead costs			798,000
Total overhead costs		$	2,124,000

Exercise 23-17 Computation of total variable and fixed overhead variances LO P3

(1) Compute the predetermined overhead application rate per hour for variable overhead, fixed overhead, and total overhead at 65% of capacity.
	Predetermined OH Rate
Variable overhead costs
Fixed overhead costs
Total overhead costs
(2) Compute the total variable and total fixed overhead variances and classify each as favorable or unfavorable.
			--------At 60% of Operating Capacity--------
		Standard DL Hours	Overhead Costs Applied	Actual Results	Variance	Fav./Unf.
Variable overhead costs
Fixed overhead costs
Total overhead costs