PLEASE HELP! World Company expects to operate at 80% of its productive capacity

Question

PLEASE HELP!

World Company expects to operate at 80% of its productive capacity of 67.500 units per month. At this planned level, the company expects to use 32.400 standard hours of direct labor Overhead is allocated to products using a predetermined standard rate based on direct labor hours. At the 80% capacity level, the total budgeted cost includes $68,040 fixed overhead cost and $408,240 variable overhead cost. In the current month, the company incurred $472,000 actual overhead and 29.400 actual labor hours while producing 51.000 units. (Round "OH costs per DL hour" to 2 decimal places.) Compute the overhead application rate for total overhead. Compute the total overhead variance.

Explanation / Answer

Total productive capacity 67500 opeartion 80% Number of planned units 54000 Budgeted standard hours 32400 standard hours per unit (32400 / 54000) 0.60 Budgeted fixed overhead cost 68040 Budgeted variable overhead cost 408240 1) Overhead application rate predetermined OH rate Variable overhead cost (408240/32400) 12.60 Fixed overhead cost ( 68040/32400) 2.10 Total overhead cost 14.70 2) Total overhead variance predetermined OH rate Standard DL overhead cost applied Actual Results Variance Fav/Unfav hours A B A*B Variable overhead cost 12.60 30600 385560 fixed cost 2.10 30600 64260 Total overhead cost 14.70 449820 472000 22180 Unfavourable standard DL hours = 51000*0.60 = 30600

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