Question

In October, Pine Company reports 22,000 actual direct labor hours, and it incurs $114,900 of manufacturing overhead costs. Standard hours allowed for the work done is 21,500 hours. The predetermined overhead rate is $5.39 per direct labor hour.

Compute the total overhead variance. (Round answer to 0 decimal places, e.g. 125.)
Total Overhead Variance $ FavorableNeither favorable nor unfavorableUnfavorable

Answer 1

Answer: Total Overhead Variance = $985 Favorable

Explanation: Standard Cost = 21,500 $5.39 = $115,885

Actual Cost = $114,900

Total Overhead Variance = $115,885 - $114,900 = $985

Answer 2

Total Overhead Variance = $985 Favorable

Step-by-step explanation:

Actual Direct Labor Hours = 22,000

Actual Cost = $114,900

Actual Rate = $114,900/22,000 = $5.22

Standard Hours = 21,500

Standard Rate = $5.39

Total Overhead Variance = Standard Cost - Actual Cost

Standard Cost = 21,500
`*` $5.39 = $115,885

Actual Cost = $114,900

Total Overhead Variance = $115,885 - $114,900 = $985 Favorable as the actual cost is less than standard cost of overheads.