Zero Company's standard factory overhead application rate is $3.77 per direct labor hour (DLH), calculated at 90% capacity = 1,000 standard DLHs. In December, the company operated at 80% of capacity, or 889 standard DLHs. Budgeted factory overhead at 80% of capacity is $3,100, of which $1,420 is fixed overhead. For December, the actual factory overhead cost incurred was $3,760 for 930 actual DLHs, of which $1,370 was for fixed factory overhead.

If Zero Company uses a two-way breakdown (decomposition) of the total overhead variance, what is the total factory overhead flexible-budget variance for December (to the nearest whole dollar)? (Do not round intermediate calculations.)

$660 unfavorable

1. Total factory overhead FB variance = Total actual OH ? FB based on output (or, standard allowed DLHs for output achieved).

2. Total actual OH = $3,760 (given).

3. FB for OH, based on output = Budgeted fixed OH + Budgeted VOH based on output (i.e., based on standard allowed hours for units produced during the period).

4. Budgeted fixed overhead = $1,420 (given).

5. Budgeted variable OH based on output = Standard variable OH rate/DLH × standard DLHs allowed for this period's output = [($3,100 ? $1,420)/889 DLHs] × 889 DLHs = $1.89/DLH × 889 DLHs = $1,680.

6. Therefore, total factory overhead FB variance = $3,760 ? ($1,420 + $1,680) = $3,760 ? $3,100 = $660U (to nearest whole number).

Note: the variance here is unfavorable (U) since actual total overhead cost incurred during the period > budgeted total overhead cost for the output level achieved.