In October, Keane Company reports 21,000 actual direct labor hours, and it incur

Question

In October, Keane Company reports 21,000 actual direct labor hours, and it incurs $115,000 of manufacturing overhead costs. Standard hours allowed for the work done is 20,000 hours. The predetermined overhead rate is $6 per direct labor hour. Compute the total overhead variance.
In October, Keane Company reports 21,000 actual direct labor hours, and it incurs $115,000 of manufacturing overhead costs. Standard hours allowed for the work done is 20,000 hours. The predetermined overhead rate is $6 per direct labor hour. Compute the total overhead variance.
BE25-6 In October, Keane Company reports 21,000 actual direct labor hours, and it incurs $115,000 of manufacturing overhead costs. Standard hours allowed for the work done is 20,000 hours. The predetermined overhead rate is $6 per direct labor hour. Compute the total overhead variance.

Explanation / Answer

Price Variance compares standard price with actual, for the quantity purchased (Not quantity used).

In this problem, quantity purchased and used are the same -4,546 .

Price paid was $18,065/ 4,546 = 3.973per pound vs 4.00 standard,

or .31 favorable x 4,546 = 1409.26Favor Price Variance

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