Question

Required information (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 (30 lbs. e $2.50 per Ib.) Direct labor (20 hrs. e $4.80 per hr.) Variable overhead (20 hrs. e $2.30 per hr.) Fixed overhead (20 hrs. $1.20 per hr.) Total standard cost $ 75.00 96.00 46.00 24.00 $241.00 The $3.50 ($2.30 + $1.20) total overhead rate per direct labor hour is based on an expected operating level equal to 70% of the factory's capacity of 53,000 units per month. The following monthly flexible budget information is also available. Operating Levels (t of capacity) Plexible Budget 658 700 Budgeted output (units) 34,450 37,100 39,750 Budgeted labor (standard hours) 689,000 742,000 795,000 Budgeted overhead (dollars) Variable overhead $1,584,700 $1,706,600 $1,828,500 Fixed overhead 890,400 890,400 890,400 Total overhead $2,475,100 $2,597,000 $2,718,900 758 During the current month, the company operated at 65% of capacity, employees worked 652,000 hours, and the following actual overhead costs were incurred. Variable overhead costs Fixed overhead costs Total overhead costs $1,525,000 954.000 $2,479,000

Answer 1

1)
	Predetermined OH Rate
Variable overhead costs	$ 2.30	per DLH
Fixed overhead costs	$ 1.20	per DLH
Total overhead costs	$ 3.50	per DLH

2)
			At 65% of Operating Capacity
	Predetermined OH rate (A)	Standard DL Hours (B)	Overhead Costs Applied C = (A x B)	Actual Results (D)	Variance ( C - D )	Fav./Unf.
Variable overhead costs	$ 2.30	689,000	$ 1,584,700	$ 1,525,000	$ 59,700	Favorable
Fixed overhead costs	$ 1.20	689,000	$ 826,800	$ 954,000	$ 127,200	Unfavorable
Total overhead costs	$ 3.50		$ 2,411,500	$ 2,479,000	$ 67,500	Unfavorable