Weygandt, Financial & Managerial Accounting, e PRINTER VERSION BACK Exercise 25-

Question

Weygandt, Financial & Managerial Accounting, e PRINTER VERSION BACK Exercise 25-12 (Part Level Submission) Byrd Company produces one product, a putter caled GO- normal capacity is $ 720,000 direct labor to produce one Go-Putter. The normal production capacity for this putter is 120,000 units per year. The total budgeted overhead at f$ 240,000 of variable costs and $ 480,000 of foced costs. Bynd applies overhead o the basis of direct labor hours During the current year, Byrd produced 77,100 putters, worked 88,600 direct l labor hours, and incurred variable overhead costs of $ 138,780 and fixed overhead costs of $407,600 (b) Compute the applied overhead for Byrd for the year Overhead Applieds Attempts: O of 3 used sAVE FOR LATER SUBMET ANSWEA

Explanation / Answer

Calculation of predetermined overhead rate:

Total standard direct labour hours on the basis of normal capacity = 120000*1 = 120000 hours

Budgeted variable cost = 240000

Predetermined Overhead rate = 240000/120000 = 2 per hour

Budgeted Fixed cost = 480000

Predetermined Overhead rate = 480000/120000 = 4 per hour

Overhead applied = 138780 + 407600 = 546380

Calculation of overhead variance:

Actual direct labor hours taken in production = 88600

Overhead cost to be incurred = 2*88600 + 4*88600 = 177200 + 354400 = 531600

Total overhead variance =   Overhead applied - Overhead cost to be incurred

= 546380 - 531600 = 14780 unfavorable

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