Prevlars budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,800 hours of activity: variable overhead, $387,600; fixed overhead, $620,000. The company actually worked 43,800 hours and actual overhead incurred was: variable, $394,500; fixed, $624,000.

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