Question

Use the following information for the Exercises below. The following information applies to the questions displayed below] Sedona Company set the following standard costs for one unit of its product for this year Direct material (28 Ibs. $2.se per Ib.) Direct labor (10 hes. $22.ee per hr.) Variable overhead (10 hrs. e $4.00 per hr.) Fixed overhead (1e hrs. $1.68 per hr.) 220.ee 40.ee 16.00 $326.0 Total standard cost The $5.60 ($4.00 $160) total overhead rate per direct labor hour is based on an expected operating level equal to 75 % of the factory's capacity of 50,000 units per month. The following monthly flexible budget information is also available. Operating Level1s (S of capacity) 7e 35,880 35e, eee 75% 37,s80 375,e00 Flexible Budget Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dollars) Variable overhead Fixed overhead 48,800 400,000 $1,500,000 600.000 $1,480,eee 6ee,ee0 $1,600,000 6ee, eee $2,000,0ee $2,100,000 $2,20e,eee Total overhead During the current month, the company operated at 70 % of capacity, employees worked 340,000 hours, and the following actual overhead costs were incurred. Variable overhead costs $1,375,000 628,600 $2,003,600 Fixed overbead costs Total overhead costs Exercise 08-17 Computing total variable and fixed overhead variances LO P4 (1) Compute the predetermined overhead application rate per hour for total overhead, variable overhead, and fixed overhead Predetermined OH Rate Variable overhead costs Fooed overhead costs Total overhead costs (2) Compute the total variable and total foxed overhead variances and classify each as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable. unfavorable, and no variance. Round "Rate per hour answers to 2 decimal places.) At 70% of Operating Capacity- Standard DL Overhead Costs Actual Results Variance Fav/Unf Hours Applied Variable overhead costs Foxed overhead costs Total overhead costs

Answer 1

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1. Predetermined overhead rate computations
Expected volume	75%
Expected total overhead	$       2,100,000
Expected hours	375,000 hrs.
Variable cost per hour ($1,500,000/ 375,000)	$                  4.00
Fixed cost per hour ($600,000/ 375,000)	$                  1.60
Total cost per hour ($2,100,000/ 375,000)	$                  5.60
2. Variable overhead cost variance
Variable overhead cost incurred [given]	$       1,375,000
Variable overhead cost applied [350,000 hrs. @ $4.00]	$       1,400,000
Variable overhead cost variance	$     25,000 F
Fixed overhead cost variance
Fixed overhead cost incurred [given]	$           628,600
Fixed overhead cost applied [350,000 hrs. @ $1.60]	$           560,000
Fixed overhead cost variance	$    68,600 U