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Math  /  Data & Statistics

QuestionIn October, Pine Company reports 21,000 actual direct labor hours, and it incurs \118,000ofmanufacturingoverheadcosts.Standardhoursallowedfortheworkdoneis20,600hours.Thepredeterminedoverheadrateis118,000 of manufacturing overhead costs. Standard hours allowed for the work done is 20,600 hours. The predetermined overhead rate is \6 6 per direct labor hour.
Compute the total overhead variance.
Total Overhead Variance \ \square \square$ eTextbook and Media
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Studdy Solution

STEP 1

1. Actual direct labor hours: 21,000 hours.
2. Actual manufacturing overhead costs: \$118,000.
3. Standard hours allowed: 20,600 hours.
4. Predetermined overhead rate: \$6 per direct labor hour.
5. Total overhead variance is calculated as the difference between actual overhead costs and applied overhead costs.

STEP 2

1. Calculate the applied overhead costs.
2. Compute the total overhead variance.

STEP 3

Calculate the applied overhead costs using the standard hours allowed and the predetermined overhead rate.
Applied Overhead Costs=Standard Hours Allowed×Predetermined Overhead Rate \text{Applied Overhead Costs} = \text{Standard Hours Allowed} \times \text{Predetermined Overhead Rate}
Applied Overhead Costs=20,600 hours×$6/hour \text{Applied Overhead Costs} = 20,600 \, \text{hours} \times \$6/\text{hour}
Applied Overhead Costs=$123,600 \text{Applied Overhead Costs} = \$123,600

STEP 4

Compute the total overhead variance by subtracting the applied overhead costs from the actual overhead costs.
Total Overhead Variance=Actual Overhead Costs−Applied Overhead Costs \text{Total Overhead Variance} = \text{Actual Overhead Costs} - \text{Applied Overhead Costs}
Total Overhead Variance=$118,000−$123,600 \text{Total Overhead Variance} = \$118,000 - \$123,600
Total Overhead Variance=−$5,600 \text{Total Overhead Variance} = -\$5,600
The total overhead variance is:
−$5,600 \boxed{-\$5,600}

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