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

Direct materials (48 kgs. @ $4 per kg.) . . . . . . . . $192.00

Direct labor (12 hrs. @ $9 per hr.) . . . . . . . . . . . 108.00

Overhead (12 hrs. @ $4.50 per hr.) . . . . . . . . . . . 54.00

Total standard cost . . . . . . . . . . . . . . . . . . . . . . . . . $354.00

The predetermined overhead rate ($4.50 per direct labor hour) is based on an expected volume of 50% of the factory’s capacity of 10,000 units per month. Following are the company’s budgeted overhead costs per month at the 50% level.

The company incurred the following actual costs when it operated at 40% of capacity in December.

Required
1. Examine the monthly overhead budget to
(a) Determine the costs per unit for each variable overhead item and its total per unit costs, and
(b) Identify the total fixed costs per month.
2. Prepare flexible overhead budgets for December showing the amounts of each variable and fixed cost at the 40%, 50%, and 60% capacity levels.
3. Compute the direct materials cost variance, including its price and quantity variances.
4. Compute the direct labor cost variance, including its rate and efficiency variances.
5. Prepare a detailed overhead variance report that shows the variances for individual items ofoverhead.

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Overhead Budget (50% Capacity) Variable overhead costs Indirect labor . ..._. ._.. .._.. Power Repairs and maintenance..30,000 Total variable overhead costs 80,000 .... $170,000 Fixed overhead costs Depreciation-building20,000 Depreciation iery Taxes and insurance Supervision Total fixed overhead costs... . 30,000 .*.0,000 . 40,000 100,000 $270,000 Total overhead costs Direct materials (196.000 kgs. @ $4.00). Direct labor (46,000 hrs. $9.15) Overhead costs $ 784.000 420.900 Indirect materials.... $30.000 66,000 or . Power . Repairs and maintenance Depreciation-building . .21.000 20,000 Taxes and insurance.. Supervision3 9.600 39.600 231.800 Total costs $1.436700