Sedona Company set the following standard costs for one unit of its product for
ID: 2527717 • Letter: S
Question
Sedona Company set the following standard costs for one unit of its product for 2017.
The $3.30 ($2.20 + $1.10) total overhead rate per direct labor hour is based on an expected operating level equal to 65% of the factory's capacity of 52,000 units per month. The following monthly flexible budget information is also available.
During the current month, the company operated at 60% of capacity, employees worked 591,000 hours, and the following actual overhead costs were incurred.
Exercise 23-17 Computation of total variable and fixed overhead variances LO P3
Direct material (30 Ibs. @ $2.20 per Ib.) $ 66.00 Direct labor (20 hrs. @ $4.00 per hr.) 80.00 Factory variable overhead (20 hrs. @ $2.20 per hr.) 44.00 Factory fixed overhead (20 hrs. @ $1.10 per hr.) 22.00 Standard cost $ 212.00Explanation / Answer
1 Predetermined OH Rate Variable Overhead Costs 2.20 Fixed Overhead Costs 1.10 Total Overhead Costs 3.30 Working Notes: 65% Budgeted Hours 676000 Per Hour Variable OH 1487200 2.20 Fixed OH 743600 1.10 Total OH 2230800 3.30 2 --------At 60% of Operating Capacity-------- Predetermined OH Rate Standard DL Hours Overhead Costs Applied Actual Results Variance Fav./Unf. Variable overhead costs 2.20 624000 1372800 1326000 46800 Favourable Fixed overhead costs 1.19 624000 743600 798000 -54400 Unfavourable Total overhead costs 3.39 2116400 2124000 Working Notes: 60% Budgeted Hours 624000 Per Hour Variable OH 1372800 2.20 Fixed OH 743600 1.19 Total OH 2116400 3.39