The Littlefield Company applies manufacturing overhead costs to products on the
ID: 2402672 • Letter: T
Question
The Littlefield Company applies manufacturing overhead costs to products on the basis of direct labor-hours. The standard cost card shows that 12 direct labor-hours are required per unit of product. For August, the company budgeted to work 360,000 direct labor-hours and to incur the following total manufacturing overhead costs:
$475,200
$396,000
During August, the company completed 28,000 units of product, worked 344,000 direct labor-hours, and incurred the following total manufacturing overhead costs:
$461,200
$395,600
The denominator activity in the predetermined overhead rate is 360,000 direct labor-hours. The variable overhead spending variance for August is:
$17,200 F.
$17,200 U.
$26,000 F.
$26,000 U.
Total fixed overhead costs$475,200
Total variable overhead costs$396,000
Explanation / Answer
Budgeted variable overhead cost ($ ) 396,000.00 Budgeted Direct Labor-hours ( Hours ) 360,000.00 Budgeted variable overhead per hour ($ ) 1.1 Actual hours worked (hours ) 344,000.00 Budgeted variable overhead for actual production ( 344,000 hours x $ 1.1 ) 378,400.00 Actual variable overhead ($ ) 395,600.00 Variable overhead spending variance = Actual hours worked x (Actual overhead rate - standard overhead rate) = $ 378,400 - $ 395,600 = $ 17,200 U
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