Jackson Company\'s overhead rate was based on estimates of $198,000 for overhead
ID: 2585783 • Letter: J
Question
Jackson Company's overhead rate was based on estimates of $198,000 for overhead costs and 18,000 direct labour hours. Jackson's standards allow two hours of direct labour per unit produced. Production in May was 900 units, and actual overhead incurred in May was $20,500. The normal capacity overhead budgeted for 1,800 standard direct labour hours is $18,600 ($6,000 fixed and $12,600 variable). HINT-watch annual vs. monthly information. Use the information provided to answer the following questions: a) Calculate the pre-determined overhead rate for the year:$ per direct labour hour Answer is 11.00 b) Calculate the total applied manufacturing overhead for May: $ Answer is 19,800 Answer is 700.00 c) Calculate the total overhead varlance (the under- or over-applied overhead): $ d) is the overhead under- or over-applied? e) is the total averhead variance favourable or unfavourable? :Answer is Unfavourable Calculate the overhead budget variance: g) Is the overhead budget variance favourable or unfavourable? h) Calculate the fxed overhead volume variance: S Answer is 1900 : Answer is Unfavorable Answer is 1200.00 Is the fixed overhead volume variance favourable or unfavourable? : Answer is FavourableExplanation / Answer
A. Predetermined overhead rate=estimated overhead/estimated direct labour hours
=$198,000/18,000 DLH
=$11/ DLH
B.
Total applied manufacturing overhead for May=2 DLH × 900 units×$11/DLH
=$19,800
C.
Total overhead variance =Actual overhead -applied overhead
=$20,500-$19,800
=$700 U
D. Under applied. Actual overhead is $20,500 and applied overhead is only $19,800 so it under applied by $700.
E.
Unfavourable . As actual is more than applied or budgeted.
F. Overhead budget variance=actual overhead - normal capacity overhead
=$20,500-$18,600
=$1,900
G. Unfavourable . Account actual is more than normal capacity overhead.
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