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    Sebastian Company overhead variances

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    Sebastian Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below:
    â?¢Variable overhead
    (5 hours @ $12 per direct manufacturing labor hour) $ 60
    â?¢Fixed overhead
    (5 hours @ $15* per direct manufacturing labor hour) 75
    Total overhead per switch$135
    * Based on capacity of 200,000 direct manufacturing labor hours per month.
    The following information is available for the month of December:
    â?¢46,000 switches were produced although 40,000 switches were
    scheduled to be produced.
    â?¢225,000 direct manufacturing labor hours were worked at a total cost of
    â?¢Variable manufacturing overhead costs were $2,750,000

    a. Under the 2-variance method, the flexible budget variance for December was ?
    b. The total variable manufacturing overhead variance was?

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    Solution Summary

    Your response includes a chart in excel useful for future problems in analyzing all the variable overhead variances, including those requested. Click on cells to see formula.