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Byrd Company produces one product, a putter called GO-Putter
Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 100,000 units per year. The total budgeted overhead at normal capacity is $850,000 comprised of $250,000 of variable costs and $600,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.
During the current year, Byrd produced 95,000 putters, worked 94,000 direct labor hours, and incurred variable overhead costs of $256,000 and fixed overhead costs of $600,000.
Instructions
(a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
(b) Compute the applied overhead for Byrd for the year.
(c) Compute the total overhead variance.
Expert Solution
|
(a) |
|
Overhead Budget (at normal capacity) |
÷ |
Direct Labor Hours (at normal capacity) |
= |
Predetermined Overhead Rate |
|
Variable |
$250,000 |
|
100,000 |
|
$2.50 |
|
|
Fixed |
600,000 |
|
100,000 |
|
$6.00 |
|
|
(b) |
|
Standard Hours Allowed |
X |
Predetermined Overhead Rate |
= |
Overhead Applied |
|
|
95,000 |
|
$8.50 |
|
$807,500 |
|
|
|
|
|
|
|
|
|
|
(c) |
|
Actual Overhead |
– |
Overhead Applied |
= |
Total Overhead Variance |
|
|
$856,000 |
– |
$807,500 |
= |
$48,500 U |
|
|
|
($256,000 + $600,000) |
|
(95,000 X $8.50) |
|
|
|
please see the pdf file.
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