Question

The predetermined overhead rate for Jordan Company is $5, comprised of a variable overhead rate of...

The predetermined overhead rate for Jordan Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150,000 was divided by normal capacity of 30,000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $9,500 variable and $6,050 fixed, and standard hours allowed for the product produced in June was 3,000 hours. The total overhead variance is a. $3,050 F. b. $550 F. c. $550 U. d. $3,050 U.

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Answer #1

Ans. Option C $550 U

. Total overhead variance = Actual overhead incurred - Budgeted overhead
$15,550 - $15,000
$550 Unfavorable
*Calculations:
*Actual overhead incurred = Actual variable overhead + Actual fixed overhead
$9,500 + $6,050
$15,550
*Budgeted overhead = Standard hours allowed * Predetermined overhead rate
3,000 * $5
$15,000
*If Actual overhead incurred > Budgeted overhead = Unfavorable variance
*If Actual overhead incurred < Budgeted overhead = Favorable variance
*If Actual overhead incurred = Budgeted overhead = None (neither favorable or unfavorable)
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