Abba Company produces sails for boats. The Houston plant uses a standard costing

Question

Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards and actuals.

Direct labor is the basis for applying variable and fixed overhead.

What is the dollar amount for Variable Overhead Applied?

Standards     Direct Labor         Standard Rate $ 12         Standard Usage 0.78 hours     Variable Overhead         Standard Rate $ 7 December Data     Budgeted Production for December 28,571     Budgeted Fixed Overhead for December $ 42,606     Number of Sails Produced 108,357     Direct Labor         Actual Usage 23,344 hours     Actual Variable Overhead Costs $ 504,021     Actual Fixed Overhead Costs $ 150,038

Explanation / Answer

variable overhead applied = actual no. of sails produced * standard variable cost per unit

= 108357 * ($ 7 * 0.78 hrs )

= $ 591629

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