Question

The predetermined overhead rate for Sheridan Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $12046 variable and $7638 fixed, and standard hours allowed for the product produced in June was 3800 hours. The total overhead variance is

Answer 1

Total Overhead Variance = $684 Unfavorable

Step-by-step explanation:

Total Overhead Variance = Standard Overheads - Actual Overheads

Standard Overhead for actual hours = 3,800 hours
`*` $5 = $19,000

Actual overheads = $12,046 + $7,638 = $19,684

Therefore total overhead variance = $19,000 - $19,684 = - $684

Since the value is negative that is because actual overheads are more than standard overheads, therefore, the variance is unfavorable.

Total Overhead Variance = $684 Unfavorable