Exercise $23-27{?}^A$

Computing total variable and fixed overhead variances

Sedona Company set the following standard costs for one unit of its product for this year.

Direct material $(20$ lbs @ $$2\mathrm{.}50$ per lb$.).$

Direct labor $(10$ hrs$.$ @ $$22\mathrm{.}00$ per DLH$).$

$q,$ $ $50$

$q,$

Variable overhead $(10$ hrs$.$ @ $$4\mathrm{.}00$ per DLH$).....40$

Fixed overhead $(10$ hrs$.$ @ $$1\mathrm{.}60$ per DLH$).......16$

Standard cost per unit $.q,$ $$326$

The $$5\mathrm{.}60($$$4\mathrm{.}00+$$$1\mathrm{.}60)$ total overhead rate per direct labor hour $($DLH$)$ is based on a predicted activity level of $37,500$ units, which is $75\%$ of the factory's capacity of $50,000$ units per month. The following monthly flexible budget information is available.

$\backslash$table$[[$Flexible Budget,Operating Levels $(\%$ of capacity$)],[70\%,75\%,80\%],[$Budgeted production $($units$).......,35,000,37,500,40,000],[$Budgeted direct labor $($standard hours$),350,000,375,000,400,000],[$Budgeted overhead$],[$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, direct labor of $340,000$ hours were used, and the following actual overhead costs were incurred.

$\backslash$table$[[$Actual variable overhead $...,$$$1,375,000$