Prevlars budget for variable overhead and fixed overhead revealed the following information for an anticipated 41,000 hours of activity: variable overhead, $397,700; fixed overhead, $625,000. The company actually worked 44,000 hours and actual overhead incurred was: variable, $406,500; fixed, $628,000.

Required:

1. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
2. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance. Assuming the use of a flexible budget.
3. Which of the two budgets (static or flexible) is preferred for performance evaluations?

A. Actual B. Flexible budget C. Preferred for performance evaluations