Based on the below information, respond to the below questions. Estimated overhe
ID: 2445791 • Letter: B
Question
Based on the below information, respond to the below questions.
Estimated overhead
$320,000
Actual overhead costs incurred
$344,400
Estimated direct labour hours
40,000
Actual direct labour hours worked
42,000
The amount of the overhead variance is:
A) $24,400 overapplied.
B) $24,400 underapplied.
C) $8,400 overapplied.
D) $8,400 underapplied.
The budgeted factory overhead rate for applying manufacturing overhead is:
A) $7.62
B) $8.00
C) $8.20
D) $8.61
If the budgeted factory overhead rate is used to apply overhead, applied manufacturing overhead is:
A) $321,000
B) $328,000
C) $336,000
D) $344,400
Estimated overhead
$320,000
Actual overhead costs incurred
$344,400
Estimated direct labour hours
40,000
Actual direct labour hours worked
42,000
Explanation / Answer
overhead variance = estimate overheads - actual overheads = 320,000 - 344,400 = -24,400. (unfavorable). This is underapplied variance as the budgeted costs are lower than actual costs.
So the answer is option "b" $24,400 underapplied.
Budgeted factory overhead rate = budgeted overhead costs/budgeted labor hours = $320,000/40,000 hours = $8 per hour. The answer is option "b" i.e $8.
budgeted overhead rate = $8. applied overhead = actual hours*budgeted overhead rate
= 42,000 hours*$8 per hour = $336,000. Hence the answer is option "c" i.e $336,000.
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