World Company expects to operate at 90% of its productive capacity of 17,000 uni

Question

World Company expects to operate at 90% of its productive capacity of 17,000 units per month. At this planned level, the company expects to use 13,770 standard hours of direct labor Overhead is allocated to products using a predetermined standard rate based on direct labor hours. Athe 90% capacity level, h total budgeted cost includes $27,540 fixed overhead cost and $192,780 variable overhead cost. In the current month, the company incurred $302,020 actual overhead and 13,460 actual labor hours while producing 20,800 units. (Do not round intermediate calculations. Round "OH costs per DL hour" to 2 decimal places.) (1) Compute the overhead application rate for total overhead. Predetermined OH rate Variable overhead costs Fixed overhead costs Total overhead costs (2) Compute the total overhead variance. ctual production 20,800 units Standard DL Hours Overhead costs applied Actual resultsVariance Fav./Unf Variable overhead costs Fixed overhead costs Total overhead costs

Explanation / Answer

1 Predetermined OH Rate Budgeted Costs Amt Standard DLH Predetermined OH Rate Variable OH Cost 2.00 Variable OH Cost 27540 13770 2.00 (27540/13770) Fixed OH Cost 14.00 Fixed OH Cost 192780 13770 14.00 (192780/13770) Total OH Cost 16.00 Total OH Cost 220320 2 Total Variances: Standard DL Hours OH Cost Applied Actual Results Variance F/UF Variable OH Cost 16848 33,696 Fixed OH Cost 16848 2,69,568 Total OH Cost 3,02,020 3,03,264 3,02,020 1,244 Favourable Standard DLH 13770 Standard Units 17000 DLH PU 0.81 (17000/13770) Actual Units 20800 Standard Hours for Actual Output 16848 (20800*0.81)

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