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

Direct materials (4.5 lb. @ $ 6 per kg.) . . . . . . . . . $ 27

Direct labor (1.5 hrs. @ $ 12 per hr.) . . . . . . . . . . 18

Overhead (1.5 hrs. @ $ 16 per hr.) . . . . . . . . . . . . 24

Total standard cost . . . . . . . . . . . . . . . . . . . . . . . . . $ 69

The predetermined overhead rate ($ 16.00 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% level.

The company incurred the following actual costs when it operated at 75% 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 (as in Exhibit 23.12) for December showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% 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 (as in Exhibit 23.15) that shows the variances for individual items ofoverhead.

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Overhead Budget (75% Capacity) Variable overhead costs Indirect materials $22.500 Indirect labor . . . . 90,000 Repairs and maintenance Total variable overhead costs 22,500 45000 $180,000 Fixed overhead costs Depreciation- building..24,000 72,000 Supervision.66,000 Total fixed overhead costs 180,000 $360,000 $ 420,900 280,440 Overhead costs $21.600 82.260 23.100 46,800 Depreciation-building...24.000 75,000 16.500 66,000 Indirect materials Power Repairs and maintenance Depreciation-machinery Taxes and insuranceCR99. 355,260 $1,056,600