Question

Sedona Company set the following standard costs for one unit of its product for 2017 Direct material (20 Tbs. $3.20 per Ib.) Direct labor (10 hrs. $8.30 per hr.) Factory variable overhead (10 hrs. 34.70 per hr.) Factory fixed overhead (10 hrs. $2.30 per hr.) Standard cost $64.00 83.00 47.00 23.00 $217.00 02:21 The $7.00 ($4.70 + $2.30) total overhead rate per direct labor hour is based on an expected operating level equal to 60% of the factory's capacity of 57,000 units per month. The following monthly flexible budget information is also available. Book Operating Levels of capacity) Print 556 608 31,350 313,500 3 4,200 342,000 37.050 370,500 sferences Plexible Budget Budgeted output (units) Budgeted labor (standard hours) Dudgeted overhead (dollars) Variable overhead Fixed overhead Total overhead $1.473,450 786,600 $2,260,050 $1.607.400 786,600 $2,396,000 $1,741.350 786,600 $2,527,950 During the current month, the company operated at 55% of capacity, employees worked 295,000 hours, and the following actual overhead costs were incurred. Variable overhead coats Fixed overhead coats Total overhead costa $1,411,000 858,050 $2,269,050

Answer 1

Solution 1:

	Predetermined overhead rate
Variable overhead costs	$4.70
Fixed overhead costs	$2.30
Total overhead costs	$7.00

		At 55% of operating capacity
Particulars		Standard DL hours	Overhead cost applied	Actual results	Variance	Fav./ Unf.
Variable overhead cost		313500	$1,473,450.00	$1,411,000.00	$62,450.00	Fav.
Fixed overhead cost			$721,050.00	$858,050.00	$137,000.00	Unf.
Total overhead cost			$2,194,500.00	$2,269,050.00	$74,550.00	Unf.

Solution 2:

Variable Overhead Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
295000	$4.78	$1,411,000.00			295000	$4.70	$1,386,500.00			313500	$4.70	$1,473,450.00
			$24,500.00	U				$86,950.00	F
			Variable overhead rate variance					Variable overhead efficiency variance
Variable overhead rate variance					$24,500.00	U
Variable overhead efficiency variance					$86,950.00	F
Variable overhead cost variance					$62,450.00	F