[The following information applies to the questions displayed below. Sedona Comp

Question

[The following information applies to the questions displayed below. Sedona Company set the following standard costs for one unit of its product for 2015. Direct material (20 lbs. $2.50 per lb.) Direct labor (10 hrs. $8.00 per hr.) Factory variable overhead (10 hrs. $4.00 per hr) Factory fxed overhead (10 hrs. $1.60 per hr.) $50.00 80.00 40.00 16.00 Standard cost $186.00 The $5.60 ($4.00+$1.60) 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 Operating Levels (% of capacity) Flexible Budget Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dollars) 70% 35,000 350,000 80% 40,000 400,000 75% 37,500 375,000 $1,400,000 $1,500,000 1,600,000 Varlable overhead Fixed overhead 600,000 600,000 600,000 Total overhead $2,000,000 2,100,000 2,200,000 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 Fixed overhead costs $1,375,000 628,600 Total overhead costs $2,003,600

Explanation / Answer

Compute the fixed overhead spending and volume variances Actual Fixed OH Cost Fixed OH (Fixed Budgeted) Standard Cost (FOH applied) $628,600 $600,000 SH x SFR $28,600 UF 350,000.00 1.6 $40,000 UF $560,000.00 Fixed Overhead Spending Variance $28,600 UF Fixed overhead Volume Variances $40,000 UF Total fixed overhead variance $68,600 UF

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