ANSWER
(a)-
Standard labor hour at normal capacity = l hour per unit*115,000 units
=115,000 labor hours
Variable =$230,000/115,000 hours =$2 per hour
Fixed = $517,500/115,000 hours =$4.5 per hour
Predetermined Overhead Rate:- $2+$4.5 =$6.5 per hour
(b)-
Overhead applied based on standard hours allowed for the actual units of product produced =$6.5 per hour* (1 hours per unit*81,700 units)
=$531,050
(c)-
Total overhead variance =Actual overhead costs – Applied overhead costs
=($132,763+$479,050)-$531,050
=$80,763 Unfavourable
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