Computing standard overhead cost, a total overhead variance, a budget variance, and spending and efficiency variances. The Denmead Company’s standard overhead rate is $10 per direct labor hour, based on expected production of 50,000 units of its product during the year. The overhead rate is based on budgeted fixed costs of $800,000 and budgeted variable costs of $200,000. Each unit requires 2 direct labor hours to complete.

During the year 19X7, 60,000 units were produced, requiring 122,000 hours of direct labor. The actual total overhead was $1,087,000.

Instructions 1. Compute the standard overhead cost per unit of product.

2. Compute the standard overhead cost charged to Work in Process during the year.

3. Compute the total overhead variance for the year and show whether it is favorable or unfavorable.

4. Compute the budget variance and the volume variance and show whether each is favorable or unfavorable.

5. Divide the budget variance into the spending variance and the efficiency variance and show whether each is favorable or unfavorable.