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. @ $2.00 per Ib.) Direct labor (20 hrs. @ $4.50 per hr.) Variable overhead (20 hrs. @ $2.50 per hr.) Fixed overhead (20 hrs. @ $1.20 per hr.) Total standard cost $ 60.00 90.ee 50.ee 24.ee $224.ee The $3.70 ($2.50 - $1.20) total overhead rate per direct labor hour is based on an expected operating level equal to 70% of the factory's capacity of 55,000 units per month. The following monthly flexible budget Information is also available. Operating Levels (% of capacity) 65% 70% 75% 35,750 38,5ee 41,250 715,000 770, eee 825,000 Flexible Budget Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dollars) Variable overhead Fixed overhead Total overhead $1,787,500 924, 000 $2,711,500 $1,925, eee 924, eee $2,849,000 $2,062,500 924,000 $2,986,500 During the current month, the company operated at 65% of capacity, employees worked 678,000 hours, and the following actual overhead costs were incurred. Variable overhead costs $1,715,800 Fixed overhead costs 999, 200 Total overhead costs $2,714,280 (1) Compute the predetermined overhead application rate per hour for total overhead, variable overhead, and fixed overhead. Predetermined OH Rate Variable overhead costs Fixed overhead costs Total overhead costs (2) Compute the total variable and total fixed overhead variances and classify each as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Round "Rate per hour" answers to 2 decimal places.) --------At 65% of Operating Capacity-------- Standard DL Overhead Costs Musler Hours Applied Actual Results Variance Fav./Unf. Variable overhead costs Fixed overhead costs Total overhead costs

Answer 1

Solution:

	Predetermined overhead rate
Variable overhead costs	$2.50
Fixed overhead costs	$1.20
Total overhead costs	$3.70

		At 60% of operating capacity
Particulars		Standard DL hours	Overhead cost applied	Actual results	Variance	Fav./ Unf.
Variable overhead cost		715000	$1,787,500.00	$1,715,000.00	$72,500.00	Fav.
Fixed overhead cost			$858,000.00	$999,200.00	$141,200.00	Unf.
Total overhead cost			$2,645,500.00	$2,714,200.00	$68,700.00	Unf.