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c.Was the total factory overhead under- or over applied? By what amount?
production-volume variance= $2,500
favorable
flexible-budget variance= $4000
Favorable
Overapplied factory overhead $6,500
E8-16 Calculating factory overhead: two variances
Montana Manufacturing Co. normally produces 10,000 units of product X
each month. Each unit requires 2 hours of direct labor, and factory overhead
is applied on a direct labor hour basis. Fixed costs and variable costs in
factory overhead at the normal capacity are $5 and $3 per unit, respectively.
Cost and production data for May follow
Production for the month.........................................9,000 units
Direct labor hours used ...........................................18,500 hours
Factory overhead incurred for:
Variable costs ...................................................$28,500
Fixed costs ......................................................$52,000a
A. Calculate the flexible-budget variance
Variable cost
(9,000 units * $3 per unit) $27,000
Fixed cost
10,000 units * $5 per unit $50,000
Flexible budget at actual production level $77,000
Actual factory over head incurred
$28,500+ $52,000 $80,500
flexible-budget variance= $3500
unFavorable