Question

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

Direct material (15 Ibs. @ $4.20 per Ib.)		$	63.00
Direct labor (10 hrs. @ $6.40 per hr.)			64.00
Variable overhead (10 hrs. @ $3.70 per hr.)			37.00
Fixed overhead (10 hrs. @ $1.50 per hr.)			15.00
Total standard cost		$	179.00

The $5.20 ($3.70 + $1.50) total overhead rate per direct labor hour is based on an expected operating level equal to 65% of the factory's capacity of 67,000 units per month. The following monthly flexible budget information is also available.

		Operating Levels (% of capacity)
Flexible Budget			60%				65%				70%
Budgeted output (units)			40,200				43,550				46,900
Budgeted labor (standard hours)			402,000				435,500				469,000
Budgeted overhead (dollars)
Variable overhead		$	1,487,400			$	1,611,350			$	1,735,300
Fixed overhead			653,250				653,250				653,250
Total overhead		$	2,140,650			$	2,264,600			$	2,388,550

During the current month, the company operated at 60% of capacity, employees worked 382,000 hours, and the following actual overhead costs were incurred.

Variable overhead costs		$	1,425,000
Fixed overhead costs			725,250
Total overhead costs		$	2,150,250

Exercise 21-17 Computing total variable and fixed overhead variances LO P4

Answer 1