Venture Company set the following standard costs for one unit of its product for 2009.
Direct material (20 Ibs. @ $5.00 per Ib.) . . . . . . . . . . . . . . . . $100.00
Direct labor (10 hrs. @ $16.00 per hr.) . . . . . . . . . . . . . . . . . . 160.00
Factory variable overhead (10 hrs. @ $8.00 per hr.) . . . . . . . . 80.00
Factory fixed overhead (10 hrs. @ $3.20 per hr.) . . . . . . . . . . 32.00
Standard cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $372.00
The $11.20 ($8.00 + $3.20) total overhead rate per direct labor hour is based on an expected operating level equal to 75% of the factory€™s capacity of 50,000 units per month. The following monthly flexible budget information is also available.

During the current month, the company operated at 70% of capacity, employees worked 340,000 hours, and the following actual overhead costs were incurred.
Variable overhead costs . . . . . . . $2,750,000
Fixed overhead costs . . . . . . . . . 1,257,200
Total overhead costs . . . . . . . . . . $4,007,200
(1) Show how the company computed its predetermined overhead application rate per hour for total overhead, variable overhead, and fixed overhead.
(2) Compute the variable and fixed overheadvariances.

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Operating Levels (% of capacity) 70% 75% 37,500 375,000 80% Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dollars) 35,000 350,000 40,000 400,000 Variable overhead Fixed overhead Total overhead $2,800,000 $3,00,000$3,200,000 1,200,000 $4,200,000 $4,400,000 1,200,000 1,200,000 $4,000,000