Question

Required information The following information applies to the questions displayed below) Sedona Company set the following standard costs for one unit of its product for this year Direct material (30 lbs. @ $2.20 per Ib.) Direct labor (10 hrs. @ $4.60 per hr.) Variable overhead (10 hrs. $3.20 per hr.) Fixed overhead (18 hrs. $1.50 per hr.) Total standard cost $ 66. 46.00 30.00 15.00 $157.00 The $4.50 ($3.00 + $1.50) total overhead rate per direct labor hour is based on an expected operating level equal to 70% of the factory's capacity of 65,000 units per month. The following monthly flexible budget information is also available. 65% Operating Levels (% of capacity 7066 75% 42,250 45,500 48,750 422,500 455,000 487,500 Flexible Budget Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dollars) Variable overhead Fixed overhead Total overhead $1,267,500 682,5e0 $1,950,000 $1,365,000 6 82,500 $2,047,500 $1,462,500 682,500 $2,145,000 During the current month, the company operated at 65% of capacity, employees worked 400,000 hours, and the following actual overhead costs were incurred. Variable overhead costs Fixed overhead costs Total overhead costs $1,224,800 730,000 $1,954,000

Answer 1

Solution 1:

Variable Overhead Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
400000	$3.06	$1,224,000.00			400000	$3.00	$1,200,000.00			422500	$3.00	$1,267,500.00
			$24,000.00	U				$67,500.00	F
			Variable overhead rate variance					Variable overhead efficiency variance
Variable overhead rate variance					$24,000.00	U
Variable overhead efficiency variance					$67,500.00	F
Variable overhead cost variance					$43,500.00	F

Solution 2:

Fixed Overhead Cost Variance

Actual Fixed OH Cost

Budgeted Fixed Overhead

Standard Cost (FOH Applies)

SH*

BR

$730,000.00

$682,500.00

422500

$1.50

$633,750.00

$47,500.00

U

$48,750.00

U

Fixed overhead Budget Variance

Fixed overhead volume variance

Fixed overhead Budget Variance

$47,500.00

U

Fixed overhead volume variance

$48,750.00

U

Total Fixed overhead variance

$96,250.00

U

Solution 3:

Overhead controllable variance
Variable Overhead rate Variance	$24,000.00	Unfavorable
Variable overhead efficiency variance	$67,500.00	Favorable
Fixed overhead spending variance	$47,500.00	Unfavorable
Overhead controllable variance	$4,000.00	Unfavorable