NSPI, a manufacturing company uses a standard cost system, given Overhead applie

Question

NSPI, a manufacturing company uses a standard cost system, given Overhead applied based on direct labor hours. The manufacturing budget for the production for the last month 25,000 units Also, includes: hours standard cost Direct labor 10,000 $15.00 $150,000.00 Variable overhead $30,000.00 Fixed overhead $80,000.00 Actual production 26,000 units Fixed overhead budget variance was $2,000.00 Favorable Find Fixed overhead during last month Is fixed overhead over or under applied, and by how much? NSPI, a manufacturing company uses a standard cost system, given Overhead applied based on direct labor hours. The manufacturing budget for the production for the last month 25,000 units Also, includes: hours standard cost Direct labor 10,000 $15.00 $150,000.00 Variable overhead $30,000.00 Fixed overhead $80,000.00 Actual production 26,000 units Fixed overhead budget variance was $2,000.00 Favorable Find Fixed overhead during last month Is fixed overhead over or under applied, and by how much?

Explanation / Answer

1) Actual fixed overhead last month = Budgeted fixed overhead - Fixed overhead Budget variance Fixed overhead budget variance is deducted as it is favorable. = 80000-2000 = $78,000 (Answer) 2) Pre-determined Fixed OH rate = Budgeted Fixed OH/Budgeted direct labor hours = 80000/10000 = $8 per DLH 4) Fixed OH applied = 26000*0.4 DLH*$8 = $83,200 [Standard DLH = 0.4 hours per unit] 5) Fixed overhead applied 83200 Actual fixed overhead 78000 Fixed overhead overapplied 5200 Fixed overhead is overapplied by $5200 (Answer)

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