Question

Required information The folloing information applies to the questions displayed below Sedona Company set the followng standard costs for one unit of ts product for 2017. Direct material (20 Ibs$3.30 per D.) Direet labor (15 hrs. e $6.00 per hr.) Paetory variable overhead (15 hrs. $2.80 per hr.) Factory fixed ovethead (15 hrs. e $1.20 per hr.) Standard cost S 66.00 90.00 42.00 18.00 $216.00 The $400 ($280 * $120) total overhead rate per direct labor hour is based on an expected operating level equal to 75% of the factory's capacity of 58,000 units per month. The following monthly flexdble budget Information Is also available. Levels of Flexible Budget Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dollars) 753 40,600 609,000 43, 500 652, 500 46,400 696, 000 Variable overhead Pixed overhead $1,705, 200 $1,827,000 $1,948,800 783,000 $2, 488, 200 $2,610,000 $2,731, B00 783,000 783, 000 Total overhead During the current month, the company operated at 70% of capacity, employees actual overhead costs were Incurred. worked 575 hours, and the following Variable overhead costs Fixed overhead costs Total overhead costs costs1,624,000 866,000 $2, 490, 000 AH Actual Hours SH- Standard Hours AVR-Actual Vartable Rate SVR Standard Variable Rate SFR Standard Fixed Rate

Answer 1

Answer (1) and (2):

(1) Predetermined overhead rate per hour at 75% capacity: Predetermined OH Rate Variable overhead costs Fixed overhead costs Total overhead costs $2.80 $1.20 $4.00 At 70% operating capaci Actual Standard DL Overhead Variance Fav./Unf Hours cost applied Results Variable overhead costs Fixed overhead costs Total overhead costs 609,000 609,000 $1,705,200 $1,624,000 $81,200 Fav $730,800 $866,000 $135,200 Unf $2,436,000 $2,490,000 $54,000 Unf

(1) Workings:

Predetermined overhead rate = Budgeted overhead at 75% capacity /Budgeted DL hours at 75% capacity

Predetermined Variable overhead rate = $1,827,000 / 652,500 = $2.80

Predetermined Fixed overhead rate = $783,000 / 652,500 = $1.20

(2)

As the company operated at 70% level:

Standard DL = 609,000

Applied Variable overhead = 609,000 * $2.80 = $1,705,200

Applied Fixed overhead = 609,000 * $1.20 = $730,800