Question:
(Variances and cost control) North Diamond Inc. applies overhead on a direct labor hour basis. Each unit of product requires 12 machine hours. Overhead is applied on a 30 percent variable and 70 percent fixed basis; the overhead application rate is $40 per hour. Standards are based on a normal monthly capacity of 24,000 machine hours. During September 2001, North Diamond produced 2,300 units of product and incurred 25,000 machine hours. Actual overhead cost for the month was $1,00,000.
a. What were standard hours allowed for September?
b. What is total annual budgeted fixed overhead cost?
c. What is the controllable overhead variance?
d. What is the noncontrollable overhead variance?