World Company expects to operate at 90 of its productive cap

World Company expects to operate at 90% of its productive capacity of 13,000 units per month. At this planned level, the company expects to use 11,115 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.950 direct labor hours per unit. At the 90% capacity level, the total budgeted cost includes $22,230 fixed overhead cost and $111,150 variable overhead cost. In the current month, the company incurred $203,300 actual overhead and 10,875 actual labor hours while producing 17,000 units. (Do not round intermediate calculations. Round \"OH costs per DL hour\" to 2 decimal places.)

(1) Compute the predetermined standard overhead rate for total overhead.
	Predetermined OH rate
Variable overhead costs
Fixed overhead costs
Total overhead costs

(2) Compute the total overhead variance.
			--------Actual production 17,000 units --------
		Standard DL Hours	Overhead costs applied	Actual results	Variance	Fav./Unf.
Variable overhead costs
Fixed overhead costs
Total overhead costs

Compute the total overhead variance.

Standared DL Hours computation

Output under Planned Capacity =13000*90%=11700

Total Labor hour under Planned capacity=11115

Hence Standare Labor Hr per unit=11115/117500=.950

No of units actualy produced=17000

Standared hour required =17000*.950=16150

Variable overhead costs =Variable cost/Standared Hr =111150/11115	10.00
Fixed overhead costs =Fixed overhead cost/Standared Hr =111150/11115	2.00
Total overhead costs	12.00

World Company expects to operate at 90% of its productive capacity of 13,000 units per month. At this planned level, the company expects to use 11,115 standard

World Company expects to operate at 90 of its productive cap

Solution

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