The Durant Company is installing an absorption standard-cost system and a flexible-overhead budget. Standard costs have recently been developed for its only product and are as follows:

Direct materials, 3 pounds at $20 ……………. $60

Direct labor, 2 hours at $14 ……………………. 28

Variable overhead, 2 hours at $5 ……………… 10

Fixed overhead ………………………………. ?

Standard cost per unit of finished product …. $ ?

Expected production activity is expressed as 7,500 standard direct-labor hours per month. Fixed overhead is expected to be $60,000 per month. The predetermined fixed-overhead rate for product costing is not changed from month to month.

1. Calculate the proper fixed-overhead rate per standard direct-labor hour and per unit.

2. Graph the following for expected production activity from 0 to 10,000 hours:

a. Budgeted variable overhead

b. Variable overhead applied to product

3. Graph the following for expected production activity from 0 to 10,000 hours:

a. Budgeted fixed overhead

b. Fixed overhead applied to product

4. Assume that 6,000 standard direct-labor hours are allowed for the output achieved during a given month. Actual variable overhead of $31,000 was incurred; actual fixed overhead amounted to $62,000. Calculate the following:

a. Fixed-overhead flexible-budget variance

b. Fixed-overhead production-volume variance

c. Variable-overhead flexible-budget variance

5. Assume that 7,800 standard direct-labor hours are allowed for the output achieved during a given month. Actual overhead incurred amounted to $99,700, $62,000 of which was fixed. Calculate the following:

a. Fixed-overhead flexible-budget variance

b. Fixed-overhead production-volume variance

c. Variable-overhead flexible-budget variance