Question

Sedona Company set the following standard costs for one unit of its product for this year Direct material (15 Ibs. 9 $3.40 per Ib.) Direct labor (10 hrs. @ $9.70 per hr.) Variable overhead (10 hrs. @ 14.90 per hr.) Fixed overhead (10 hrs. @ $2.89 per hr.) Total standard cost $ 51. 97.00 49.80 28.88 $217.00 The $6.90 ($4.90 + $2.00) total overhead rate per direct labor hour is based on an expected operating level equal to 70% of the factory's capacity of 59,000 units per month. The following monthly flexible budget information is also available. Operating Levels (% of capacity 65% 7ex 75% 38,358 41,300 44,250 383,500 413,000 442,500 Flexible Budget Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dollars) Variable overhead Fixed overhead Total overhead $1,879,150 826,000 $2,705,150 $2,023,7ee 826,eee $2,849,700 $2,168, 258 826, eee $2,994,250 During the current month, the company operated at 65% of capacity employees worked 365,000 hours, and the following actual overhead costs were incurred. Variable overhead costs $1,816,089 Fixed overhead costs 899,050 Total overhead costs $2,715,050

Answer 1

(1) Compute the Pre determined standard overhead rate for total overhead: Variable overhead costs Fixed overhead costs Total overhead costs Pre determined overhead rate 4.90 Per DL Hr $ 2.00 Per DL Hr 6.90 Per DL HT (2) Compute the Total Overhead Variance : Standard DL hours Variable overhead costs Fixed overhead costs Total overhead costs Pre determined overhead rate 4.90 2.00 6.90 At 65% Operating Capacity Overhead costs applied Actual results Variance Fav./Unf. 383500 S 1,879,150.00 $ 1,816,000.00 $ 63,150.00 Favourable 383500 $ 767,000.00 $ 899,050.00 $ 132,050.00 Unfavourable $ 2,646,150.00 $ 2,715,050.00 $ 68,900.00 Unfavourable Working note: Variable overhead costs Fixed overhead costs Total overhead costs Pre determined overhead rate 4.90 2.00 6.90 (Given in the Question)