The predetermined overhead rate for Waterway Industries is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $10064 variable and $6120 fixed, and 1700 units were produced. The direct labor standard is 2 hours per unit produced. The total overhead variance is

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Business

Norah

29 August, 19:36

The predetermined overhead rate for Waterway Industries is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $10064 variable and $6120 fixed, and 1700 units were produced. The direct labor standard is 2 hours per unit produced. The total overhead variance is

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Mateo · Answer 1

Total Fixed Overhead Variance 679.67$ favorable

Explanation:

Waterway Industries

Actual fixed overhead $ 6120

Budgeted fixed overhead $ (50000 / 15000) * 1700 = $5667

Allocated fixed overhead $ 1700 * 2*2 = $6800

Standard overhead allocation rate $5

Standard direct labor hours per unit 2 DLHr

Normal capacity DLH = 30000

Normal Capacity Units = 30,000/2 = 15,000

Actual output 1700 units

Total Fixed Overhead Variance = Budget Variance + Volume Variance

=$ 453.33 unfavorable - $ 1133 favorable = 679.67$ favorable

Budget Variance = Actual Fixed Overhead - Budgeted Fixed Overhead = $ 6120 - $ 5667 = $ 453.33 unfavorable

Volume Variance = Budgeted Fixed Overhead - Allocated Fixed Overhead

Volume Variance = $ 5667 - 6800

Volume Variance = $ 1133 favorable