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Financial & Managerial Accounting
Found in: Page 969
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

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.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Overhead Cost

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.

Step 2: Computation of actual total overhead cost

ParticularsAmounts ($)
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

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