Monrovia Manufacturing Inc. normally produces 10,000 units of product A each month.

Monrovia Manufacturing Inc. normally produces 10,000 units of product A each month. Each unit requires 4 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 $10 and $5 per unit, respectively. Cost and production data for June follow:

Production for the month. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000 units

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Direct labor hours used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,000 hours

Factory overhead incurred for:

Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,000

Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $103,000

a. Calculate the flexible-budget variance.

b. Calculate the production-volume variance.

c. Was the total factory overhead under- or overapplied? By what amount?

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