Exercise 21-20 Computing volume and controllable overhead variances LO P4

World Company expects to operate at 80% of its productive capacity of 70,000 units per month. At this planned level, the company expects to use 25,200 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.450 direct labor hour per unit. At the 80% capacity level, the total budgeted cost includes $57,960 fixed overhead cost and $322,560 variable overhead cost. In the current month, the company incurred $386,000 actual overhead and 22,200 actual labor hours while producing 53,000 units. (1) Compute the overhead volume variance. Classify each as favorable or unfavorable. (2) Compute the overhead controllable variance. Classify each as favorable or unfavorable.