Reference no: EM132547989

Redtop Co. uses a standard cost system and ... Redtop Co. uses a standard cost system and flexible budgets. The following flexible budget was prepared at the 80% operating level for the year:

Standard direct labor hours (DLHs) 28,800

Budgeted variable factory overhead cost $149,760

Total factory overhead rate per DLH $18.70

However, for purposes of calculating the fixed overhead application rate, the company defined the denominator volume as the 90% capacity level. The standard calls for four DLHs per unit manufactured. During the year, Redtop worked 33,600 DLHs to manufacture 8,500 units. The actual factory overhead cost incurred was $12,000 greater than the flexible-budget amount for the units produced, of which $5,000 was due to fixed factory overhead.

Required:

Question 1: Calculate (and provide supporting details for) each of the following variances:

1. The total factory overhead spending variance.

2. The factory overhead production volume variance.

3. The variable overhead spending variance.

4. Provide a description for each of the variances you calculated in requirements 1 through 3.