Stevens Company set the following standard costs for one unit of its product.

Direct materials (9 lb. @ $6 per lb.) . . . . . . . . . . $ 54.00

Direct labor (3 hrs. @ $16 per hr.) . . . . . . . . . . 48.00

Overhead (3 hrs. @ $11.75 per hr.) . . . . . . . . . . 35.25

Total standard cost . . . . . . . . . . . . . . . . . . . . . . $137.25

The predetermined overhead rate ($11.75 per direct labor hour) is based on an expected volume of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% level.

The company incurred the following actual costs when it operated at 75% of capacity in December.

Required
1. Examine the monthly overhead budget to
(a) Determine the costs per unit for each variable overhead item and its total per unit costs, and
(b) Identify the total fixed costs per month.
2. Prepare flexible overhead budgets (as in Exhibit 8.12) for December showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels.
3. Compute the direct materials cost variance, including its price and quantity variances.
4. Compute the direct labor cost variance, including its rate and efficiency variances.
5. Compute the
(a) Variable overhead spending and efficiency variances,
(b) Fixed overhead spending and volume variances, and
(c) Total overhead controllable variance.
6. Prepare a detailed overhead variance report (as in Exhibit 8.19) that shows the variances for individual items ofoverhead.

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Overhead Budget (75% Capacity) Varlable overhead costs Indirect matertals Indirect labor 135,000 Power Repairs and maintenance. Total variable overhead costs ······ 33,750 ..22,500 67,500 $258,750 Fixed overhead costs Depreclation-bulding Depreclation-machinery ....108,000 Taxes and Insurance ...2 Supervision . Total fixed overhead costs. . 36,000 27000 99,000 270,000 $528,750 Total overhead costs... Direct materials (139.000 Ibs. $6.10). Direct labor (43,500 hrs. @ $16.30). Overhead costs $ 847,900 709.050 $ 31,600 133.400 23,500 69,700 Depreclation bullding36,000 110,000 Repalrs and maintenance Depreclation-machinery.. Taxes and Insurance Supervision 99,000527,700 $2,084.650 Total costs .m