Sunday Corporation prepared the following performance report for variable overhead costs for the last quarter of the year.Machine hours are the cost driver for all overhead costs.

\begin{array}{|l|r|r|r|}\hline&&\text { Static }\\\text { Cost Driver(Machine Hours) }&\text { Actual }&\text { Budget }\\\text { Variable Overhead Costs: }&38,000&38,000&\text { Variances }\\\hline \text { Utilities } & \$ 15,700 & \$ 14,000 & \$ 1,700 \mathrm{U} \\\hline \text { Indirect Labor } & 86,500 & 80,500 & 6,000 \mathrm{U} \\\hline \text { Supplies } & 26,000 & 21,000 & 5,000 \mathrm{U} \\\hline \text { Maintenance } & \underline{44,900} & \underline{42,000} & \underline{2,900 \mathrm{U}} \\\hline \text { Total Variable Overhead Costs } & \$ 173,100 & \$ 157,500 & \$ 15,600 \mathrm{U} \\\hline\end{array}

The cost formulas used for the variable overhead costs are:

\begin{array} { | l | c | } \hline \text { Variable Overhead Costs } & \text { Cost Formula } \\\hline \text { Utilities } & \$ 0.40 \text { per machine hour } \\\text { Indirect Labor } & \$ 2.30 \text { per machine hour } \\\text { Supplies } & \$ 0.60 \text { per machine hour } \\\text { Maintenance } & \$ 1.20 \text { per machine hour } \\\hline\end{array}

Your boss called you into the office and reprimanded you for the unfavorable variances.The boss says you are fired unless you can explain why the variances are all unfavorable.
Required:
Calculate the flexible budget variances and the activity-level variances for each cost.

Sanchez Company Planned to Produce 12,000 Units

Multiple Choice

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