Asked by Total Sport Productions on Jul 05, 2024
Verified
Brister Incorporated has provided the following data concerning its overhead variances for the most recent period: The total manufacturing overhead is underapplied or overapplied by how much?
A) $7,136 Overapplied
B) $7,136 Underapplied
C) $27,296 Overapplied
D) $27,296 Underapplied
Overapplied
A situation where the overhead allocated to products is greater than the actual overhead incurred.
Underapplied
A situation where the allocated amount of manufacturing overhead costs is less than the actual overhead costs incurred.
Manufacturing Overhead
Costs related to the manufacturing process but not directly traceable to specific units produced, such as utility costs and salaries of maintenance personnel.
- Elucidate the interpretation of favorable and unfavorable variances in a standard cost framework.
Verified Answer
Variable overhead efficiency variance: $2,868 favorable
Variable overhead spending variance: $8,192 unfavorable
Fixed overhead budget variance: $16,816 unfavorable
Total overhead variance: $2,868 - $8,192 - $16,816 = $-22,140
Since the total overhead variance is negative, this means that the overhead was underapplied. The amount of underapplied overhead is $22,140. Therefore, the best choice is B, $7,136 underapplied (closest option to $22,140).
Learning Objectives
- Elucidate the interpretation of favorable and unfavorable variances in a standard cost framework.
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