Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standa
ID: 2453670 • Letter: B
Question
Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 115,000 units per year. The total budgeted overhead at normal capacity is $920,000 comprised of $345,000 of variable costs and $575,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.
During the current year, Byrd produced 86,300 putters, worked 92,000 direct labor hours, and incurred variable overhead costs of $194,693 and fixed overhead costs of $554,627.
(a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
Variable Fixed Predetermined Overhead Rate $___________
(b) Compute the applied overhead for Byrd for the year.
Overhead applied $ ________
(c) Compute the total overhead variance.
Total overhead variance $________
Explanation / Answer
a) predetermined variable overhead rate = Total predetermined variable cost / No of predetermined production units
= $345,000 / 115000 units
= $3 per unit
predetermined fixed overhead rate. = Total predetermined fixed overhead cost /No of predetermined production units
= $575000 / 115000 units
=$5 per unit.
predetermined total overhead rate = $920000 / 115000 units
= $8 per unit.
Variable Fixed Predetermined Overhead Rate $_8 per unit
b) Applied overhead for Byrd for the year
=Standard cost / standard production x actual production
=$920000 /115000 x 86300 putters
=$8 x 86300
=$690400.
Overhead applied $690400.
c) Total overhead variance = Applied overhead - Actual overhead incurred
= $690400-$749320
= $58920.U-unfavourable variance since actual overhead incurred is more than overhead applied.
Total overhead variance $ 58920.U
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