Sedona Company set the following standard costs for one unit of its product for
ID: 2390611 • Letter: S
Question
Sedona Company set the following standard costs for one unit of its product for 2017 Direct material (30 Ibs. $2.50 per Ib.) Direct labor (20 hrs. $4.80 per hr.) Factory variable overhead (20 hrs. $2.30 per hr.) Factory fixed overhead (20 hrs. $1.20 per hr.) 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 erating Levels (% of capacity 65% 34,450 75% Flexible Budget Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dollars) 70% 37,100 39,750 795,000 689,000 742,000 Variable overhead Fixed overhead Total overhead $1,584,700 $1,706,600 $1,828,500 890,400 $2,475,100 $2,597,000 $2,718,900 890,40e 890,40e 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 AH-Actual Hours SH Standard Hours AVR Actual Variable Rate SVR Standard Variable Rate SFR = Standard Fixed RateExplanation / Answer
AH= actual Hours 652000 SH = Standard Hours 742000 20*53000*70% AVR= Actual Variable Rate 2.21 per hour 1525000/(53000*65%*20) SVR= Standard Variable Rate 2.30 per hour SFR= Standard Fixed Rate 1.20 per hour 1 Actual Variable OH Cost Flexible Budget Standard Cost (VOH applied) AH X AVR AH X SVR SH X SVR 652000 X 2.21 652000 X 2.3 742000 X 2.3 1440920 1499600 1706600 -58680 -207000 Variable Overhead spending Variance= AH*(AVR-SVR)= 652000*(2.21-2.30)= 58680 Favorable Variable Overhead Efficiency Variance= SVR*(AH-SH)= 2.3*(652000-742000)= 207000 Favorable Total Variable Cost Variance= 265680 Favorable 2 Actual Fixed OH Cost Fixed OH (Fixed Budgeted) Standard Cost (FOH Applied) AH X SFR 652000 X 1.2 954000 890400 782400 63600 108000 Fixed Overhead spending Variance= Actual - Fixed 954000-890400 -63600 Unfavorable Fixed Overhead Efficiency Variance= SFR*(AH-SH)= 1.2*(742000-652000)= 108000 Favorable Total Variable Cost Variance= 44400 Favorable 3 Controllable Variance Variable Overhead spending Variance= 58680 Favorable Variable Overhead Efficiency Variance= 207000 Favorable Fixed Overhead spending Variance= -63600 UnFavorable Fixed Overhead Efficiency Variance= 108000 Favorable Controllable Variance 310080 Favorable