World Company expects to operate at 70% of its productive capacity of 23,000 uni

Question

World Company expects to operate at 70% of its productive capacity of 23,000 units per month. At this planned level, the company expects to use 12,075 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.750 direct labor hours per unit. At the 70% capacity level, the total budgeted cost includes $48,300 fixed overhead cost and $144,900 variable overhead cost. In the current month, the company incurred $197,750 actual overhead and 11,625 actual labor hours while producing 13,900 units. (Do not round intermediate calculations. Round "OH costs per DL hour" to 2 decimal places.) (1) Compute the predetermined standard overhead rate for total overhead. Predetermined OH rate Variable overhead costs Fixed overhead costs Total overhead costs (2) Compute the total overhead variance. Actual production 13,900 units Standard Overhead DL Hours costs applied results Actual Variance Fav./Unf Variable overhead costs Fixed overhead costs Total overhead costs Unfavorable

Explanation / Answer

Solution1:

Predetermined overhead rate for variable overhead = $144,900 / 12075 = $12 per hour

Predetermined overhead rate for fixed overhead = $48,300 / 12075 = $ 4 per hour

Predetermined overhead rate for total overhead cost = $12 + $4 = $16 per hour

Solution 2:

Computation of Total Overhead Variance - World company Particulars Standard DL hours for actual production Overhead cost applied Acutal overhead incurred Variance Favorable / Unfavorable Variable Overhead Cost 10425 $125,100.00 Fixed Overhead Cost 10425 $41,700.00 Total Overhead Cost $166,800.00 $197,750.00 $30,950.00 Unfavorable

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.