Asked by Iliana Napoles on Jun 25, 2024
Verified
Monte Industries has a standard costing system. The following data are available for July:
a. Actual manufacturing overhead cost incurred: $22000
b. Actual machine hours worked: 1600
c. Overhead volume variance: $3600 Unfavorable
d. Total overhead variance: $2000 Unfavorable
e. Overhead is assigned to production on the basis of machine hours
Instructions
Determine the amount of (1) the controllable overhead variance and (2) the overhead applied.
Controllable Overhead Variance
Controllable overhead variance is the difference between the actual overhead costs incurred and the budgeted overhead costs that could be controlled.
Overhead Applied
The portion of overhead costs allocated to specific jobs or production activities based on a predetermined formula or rate.
Overhead Volume Variance
The difference between the budgeted and actual overhead costs due to changes in the level of production or activity.
- Absorb the method for computing factory overhead rates and a range of overhead variances.
- Evaluate the performance of management by scrutinizing variance reports and recognizing steps for correction.
Verified Answer
$3600 U + X = $2000 U; so controllable variance = $1600 F
(2) Overhead applied = $20000 ($22000 - $2000)
Learning Objectives
- Absorb the method for computing factory overhead rates and a range of overhead variances.
- Evaluate the performance of management by scrutinizing variance reports and recognizing steps for correction.
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