In all problems involving variances, use “F” and “U” to indicate favorable and unfavorab...

In all problems involving variances, use “F” and “U” to indicate favorable and unfavorable variances, respectively.

(Appendix) Labor variances and four-variance overhead analysis

Com-Con Manufacturing Co. estimates the following labor and overhead costs for the period:

Each unit will require 26 hours of labor.

Estimated production for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 units

Production statistics for the period:

Actual production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 units

Actual direct labor hours used. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,015 hours

Actual direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $133,400

Actual overhead costs:

Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,009

Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,125

Required:

Use the four-variance method for overhead analysis. Calculate the variances for direct labor and overhead. Prove that the overhead variances equal over- or underapplied factory overhead for the period.