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Munoz Manufacturing Co. normally produces 10,000 units of product X each month. Each unit requires...

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Accounting

Munoz 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 $2.50 and $1.50 per direct labor hour, 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. . . . . . . . . . . . . . . . . . . . . $52,000

  1. Calculate the flexible-budget variance.
  2. Calculate the production-volume variance.
  3. Was the total factory overhead under- or overapplied? By what amount?

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