Sedona Company set the following standard costs for one unit of its product for this year. Direct material (30 pounds @ $2.00 per pound) Direct labor (20 hours @ $4.50 per DLH) Variable overhead (20 hours @ $2.90 per DLH) Fixed overhead (20 hours $1.20 per DLH) Standard cost per unit $ 60.00 90.00 58.00 24.00 $ 232.00 The $4.10 ($2.90 +$1.20) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 40,950 units, which is 65% of the factory's capacity of 63,000 units per month. The following monthly flexible budget information is available. Operating Levels (% of capacity) Flexible Budget Budgeted production (units) Budgeted direct labor (standard hours) Budgeted overhead Variable overhead Fixed overhead Total overhead 60% 37,800 756,000 65% 70% 40,950 819,000. 44,100 882,000 $ 2,375,100 982,800 $ 2,557,800 982,800 $ 2,192,400 982,800 $ 3,175,200 $ 3,357,900 $ 3,540,600 During the current month, the company operated at 60% of capacity, direct labor of 726,000 hours were used, and the following actual overhead costs were incurred. Actual variable overhead Actual fixed overhead Actual total overhead $ 2,120,000 1,065,000 $ 3,185,000 Exercise 21-27A (Algo) Computing total variable and fixed overhead variances LO P5 1. Compute the total variable overhead variance and identify it as favorable or unfavorable. (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. (Indicate the effect of the variance by selecting favorable, unfavorable, or no variance.) Standard Direct Labor Hours Overhead Rate Variable overhead variance $ 2.90 Fixed overhead variance 1.20 At 60% of Operating Capacity-....... Favorable/Unfavorable Standard Direct Labor Hours Standard Overhead Applied Actual Overhead Overhead Variance 1,065,000