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

AH = Actual Hours SH = Standard Hours AVR = Actual Variable Rate SVR = Standard Variable Rate SFR = Standard Fixed Rate

Exercise 8-17 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 Overhead Hours Actual Fav./Unf. Variance Costs AppliedResults Variable overhead costs Favorable Unfavorable Fixed overhead costs Total overhead costs Unfavorable