Question: Fundamentals of Overhead Variances 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:
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.