Sedona Company set the following standard costs for one unit of its product for 2017.

Sedona Company set the following standard costs for one unit of its product for 2017.
 

Direct material (15 Ibs. @ $3.80 per Ib.)		$	57.00
Direct labor (10 hrs. @ $9.40 per hr.)			94.00
Factory variable overhead (10 hrs. @ $4.20 per hr.)			42.00
Factory fixed overhead (10 hrs. @ $2.50 per hr.)			25.00
Standard cost		$	218.00

The $6.70 ($4.20 + $2.50) total overhead rate per direct labor hour is based on an expected operating level equal to 60% of the factory's capacity of 64,000 units per month. The following monthly flexible budget information is also available.
 

		Operating Levels (% of capacity)
Flexible Budget			55%				60%				65%
Budgeted output (units)			35,200				38,400				41,600
Budgeted labor (standard hours)			352,000				384,000				416,000
Budgeted overhead (dollars)
Variable overhead		$	1,478,400			$	1,612,800			$	1,747,200
Fixed overhead			960,000				960,000				960,000
Total overhead		$	2,438,400			$	2,572,800			$	2,707,200

During the current month, the company operated at 55% of capacity, employees worked 334,000 hours, and the following actual overhead costs were incurred.
 

Variable overhead costs		$	1,421,000
Fixed overhead costs			1,024,000
Total overhead costs		$	2,445,000

AH = Actual Hours
SH = Standard Hours
AVR = Actual Variable Rate
SVR = Standard Variable Rate
SFR = Standard Fixed Rate

Explanation

(1)
Predetermined overhead rate computations
 

Expected volume		60	%
Expected total overhead	$	2,572,800
Expected hours		384,000	hrs.
Variable cost per hour ($1,612,800 / 384,000)	$	4.20
Fixed cost per hour ($960,000 / 384,000)	$	2.50
Total cost per hour ($2,572,800 / 384,000)	$	6.70

(2)
Variable overhead cost variance
 

Variable overhead cost incurred [given]	$	1,421,000
Variable overhead cost applied [352,000 hrs. @ $4.20]		1,478,400
Variable overhead cost variance	$	57,400	F

Fixed overhead cost variance
 

Fixed overhead cost incurred [given]	$	1,024,000
Fixed overhead cost applied [352,000 hrs. @ $2]		880,000
Fixed overhead cost variance	$	144,000	U

Explanation

1.
 

Variable Overhead Spending and Efficiency Variances
Actual Overhead AH × AVR			AH × SVR			Applied Overhead SH × SVR
(Given)			334,000 × $4			352,000 × $4.20
			hours per hour			hours per hour
$1,421,000			$1,402,800			$1,478,400
	$18,200 U			$75,600 F
	(Spending variance)			(Efficiency variance)
		$57,400 F (Total variable overhead variance)

2.
 

Fixed Overhead Spending and Volume Variances
Actual Overhead			Budgeted Overhead			Applied Overhead
(Given)			(Given)			352,000 × $2
						hours per hour
$1,024,000			$960,000			$880,000
	$64,000 U			$80,000 U
	(Spending variance)			(Volume variance)
		$144,000 U (Total fixed overhead variance)