Alvarez Company’s output for the current period yields a $20,000 favorable overhead volume variance and a $60,400 unfavorable overhead controllable variance. Standard overhead applied to production for the period is $225,000. What is the actual total overhead cost incurred for the period?
The actual total overhead cost incurred for the current period is $265,400.
It refers to the ongoing expenses being incurred by a business entity for producing a product or service. Such expenses are not directly associated with the production process.
|Standard overhead applied||225,000|
|Add: Unfavorable overhead controllable variance||60,400|
|Less: Favorable overhead volume variance||(20,000)|
|Actual total overhead cost||$265,400|
Sedona Company set the following standard costs for one unit of its product for 2017.
Direct material (20 Ibs. @ $2.50 per Ib.) $ 50
Direct labor (10 hrs. @ $22.00 per hr.) 220
Factory variable overhead (10 hrs. @ $4.00 per hr.) 40
Factory fixed overhead (10 hrs. @ $1.60 per hr.) 16
Standard cost $326
The $5.60 ($4.00 + $1.60) total overhead rate per direct labor hour is based on an expected operating level equal to 75% of the factory’s capacity of 50,000 units per month. The following monthly flexible budget information is also available.
Operating Levels (% of capacity)
Budgeted output (units)
Budgeted labor (standard hours)
Budgeted overhead (dollars)
During the current month, the company operated at 70% of capacity, employees worked 340,000 hours, and the following actual overhead costs were incurred.
Variable overhead costs $1,375,000
Fixed overhead costs 628,600
Total overhead costs $2,003,600
1. Show how the company computed its predetermined overhead application rate per hour for total overhead, variable overhead, and fixed overhead.
2. Compute the total variable and total fixed overhead variances and classify each as favorable or unfavorable.
Question: Brodrick Company expects to produce 20,000 units for the year ending December 31. A flexible budget for 20,000 units of production reflects sales of $400,000; variable costs of $80,000; and fixed costs of $150,000. If the company instead expects to produce and sell 26,000 units for the year, calculate the expected level of income from operations.
City Company’s fixed budget performance report for July follows. The $647,500 budgeted total expenses include $487,500 variable expenses and $160,000 fixed expenses. Actual expenses include $158,000 fixed expenses. Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately.
Fixed Budget Actual Results Variances
Sales (in units) 7,500 7,200
Sales (in dollars) $750,000 $737,000 $13,000 U
Total expenses 647,500 641,000 6,500 F
Income from operations $102,500 $96,000 $6,500 U
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