Stevens Corporation manufactures a single product. The standard cost per unit of product is shown below.Direct materials—1 pound plastic at $7.00 per pound $ 7.00Direct labor—1.6 hours at $12.00 per hour 19.20Variable manufacturing overhead 12.00Fixed manufacturing overhead 4.00Total standard cost per unit $42.20The predetermined manufacturing overhead rate is $10.00 per direct labor hour ($16.00 ÷ 1.6). It was computed from a master manufacturing overhead budget based on normal production of 8,000 direct labor hours (5,000 units) for the month. The master budget showed total variable costs of $60,000 ($7.50 per hour) and total fixed overhead costs of $20,000 ($2.50 per hour). Actual costs for October in producing 4,800 units were as follows.Direct materials (5,100 pounds) $ 36,720Direct labor (7,400 hours) 92,500Variable overhead 59,700Fixed overhead 21,000    Total manufacturing costs $209,920The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.What is the total overhead variance?

Question
Asked Nov 21, 2019
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Stevens Corporation manufactures a single product. The standard cost per unit of product is shown below.

Direct materials—1 pound plastic at $7.00 per pound   $ 7.00
Direct labor—1.6 hours at $12.00 per hour   19.20
Variable manufacturing overhead   12.00
Fixed manufacturing overhead   4.00
Total standard cost per unit   $42.20


The predetermined manufacturing overhead rate is $10.00 per direct labor hour ($16.00 ÷ 1.6). It was computed from a master manufacturing overhead budget based on normal production of 8,000 direct labor hours (5,000 units) for the month. The master budget showed total variable costs of $60,000 ($7.50 per hour) and total fixed overhead costs of $20,000 ($2.50 per hour). Actual costs for October in producing 4,800 units were as follows.

Direct materials (5,100 pounds)   $ 36,720
Direct labor (7,400 hours)   92,500
Variable overhead   59,700
Fixed overhead   21,000
    Total manufacturing costs   $209,920


The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

What is the total overhead variance?

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Expert Answer

Step 1

Total overhead variance is calculated by subtracting the applied overhead from the actual overhead. If the actual overhead is more than applied overhead then the variance is unfavorable and vice-a-versa.

Step 2

To calculate total overhead variance, actual overhead & applied overhead is calculated first.

Actual overhead is calculated as follows:

Actual overhead: Actual variable overhead + Actual fixed overhead

Actual overhead: ($59,700 + $21,000) = $80,700

Applied overhead is calculated as follows:

'standard fixed overhead per unit
Applied overhead =| actual quantity x
+standard variable overhead per unit
=(4,800x (S4+S12))
= (4,800x $16)
=$76,800
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'standard fixed overhead per unit Applied overhead =| actual quantity x +standard variable overhead per unit =(4,800x (S4+S12)) = (4,800x $16) =$76,800

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Step 3

Total overhead variance is c...

(actual overhed - applied overhead)
= ($80,700-$76,800)
Total overhead variance
=$3,900 unfavorab le
help_outline

Image Transcriptionclose

(actual overhed - applied overhead) = ($80,700-$76,800) Total overhead variance =$3,900 unfavorab le

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