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The Elton John Co
The Elton John Co. estimated Department A's overhead at P255,000 for the period based on an estimated volume of 100,000 direct labor hours. At the end of the period, the factory overhead control account for Department A had a balance of P265,500; actual direct labor hours were 105,000. What was the overhead variance for the period? Indicate if it's overapplied or underapplied, ex. 1000 overapplied. *
Expert Solution
Standard overhead rate per hour = Standard Overhead / Estimated volume
Standard overhead rate per hour = P255,000 / 100,000 hrs
Standard overhead rate per hour = P2.55
Overhead for actual volume = Standard overhead rate per hour x Actual hours
Overhead for actual volume = P2.55 x 105,000 hrs
Overhead for actual volume = P267,750
Overhead Variance = Standard Overhead - Overhead for actual volume
Overhead Variance = P255,000 - P267,750
Overhead Variance = P12,750 Unfavourable
Actual overhead = P265,000
Applied overhead = P267,750
Overapplied overhead = P2,750
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