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[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 (20 Ibs. @ $2.50 per Ib.)		$	50.00
Direct labor (10 hrs. @ $22.00 per hr.)			220.00
Variable overhead (10 hrs. @ $4.00 per hr.)			40.00
Fixed overhead (10 hrs. @ $1.60 per hr.)			16.00
Total standard cost		$	326.00

The $5.60 ($4.00 + $1.60) 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 Levels (% of capacity)
Flexible Budget			70%				75%				80%
Budgeted output (units)			35,000				37,500				40,000
Budgeted labor (standard hours)			350,000				375,000				400,000
Budgeted overhead (dollars)
Variable overhead		$	1,400,000			$	1,500,000			$	1,600,000
Fixed overhead			600,000				600,000				600,000
Total overhead		$	2,000,000			$	2,100,000			$	2,200,000

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
Fixed overhead costs			628,600
Total overhead costs		$	2,003,600

Exercise 08-18A Computing and interpreting overhead spending, efficiency, and volume 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 and classify each as favorable or unfavorable. 3. Compute the controllable variance.

Required 1 Required 2 Required 3 Compute the variable overhead spending and efficiency variances. (Indicate the effect of each variance by selecting for favorable, Round "Rate per unit" to 2 decimal places.) Actual Variable OH Cost Flexible Budget Standard Cost (VOH applied) Required 1 Required 2 Required 3 Compute the fixed overhead spending and volume variances and classify each as favorable or unfavorable. (Indicate the effect of ea favorable, unfavorable, and no variance. Round "Rate per unit" to 2 decimal places.) Actual Fixed OH cost Fixed OH (Fixed Budgeted) Standard Cost (FOH applied) Required 1 Required 2 Required 3 Compute the controllable variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.) Controllable Variance Controllable variance

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