Sedona Company set the following standard costs for one unit of its product for this year. Direct material (15 pounds @ $3.20 per pound) Direct labor (10 hours @ $9.50 per DLH) Variable overhead (10 hours @ $4.60 per DLH) Fixed overhead (10 hours @ $2.20 per DLH) Standard cost per unit $ 48.00 95.00 46.00 22.00 $ 211.00 The $6.80 ($4.60 - $2.20) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 42,000 units, which is 75% of the factory's capacity of 56,000 units per month. The following monthly flexible budget information is available. Operating Levels (% of capacity) 70% 75% 80% 39,200 42,000 44,800 392,000 420,000 448,000 Flexible Budget Budgeted production (units) Budgeted direct labor (standard hours) Budgeted overhead Variable overhead Fixed overhead Total overhead $ 1,803,200 924,000 $ 2,727,200 $ 1,932,000 924,000 $ 2,856,000 $ 2,060,800 924,000 $ 2,984,800 During the current month, the company operated at 70% of capacity, direct labor of 371,000 hours were used, and the following actual overhead costs were incurred. During the current month, the company operated at 70% of capacity, direct labor of 371,000 hours were used, and the following actual overhead costs were incurred. Actual variable overhead Actual fixed overhead Actual total overhead $ 1,716,000 1,015,200 $ 2,731,200 Exercise 8-28A (Algo) Detailed overhead variances LO P5 AH = Actual Hours SH = Standard Hours AVR = Actual Variable Rate SVR = Standard Variable Rate 1. Compute the variable overhead spending and efficiency variances. 2. Compute the fixed overhead spending and volume variances. 3. Compute the controllable variance. Required 1 Required 2 Required 3 Compute the controllable variance. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.) Controllable Variance Fixed overhead spending variance Unfavorable Unfavorable Favorable Controllable variance
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