Question

Warner Company has the following data for the past year:

Actual overhead $470,000
Applied overhead:
Work-in-process inventory $100,000
Finished goods inventory 200,000
Cost of goods sold 200,000
Total $500,000
Warner uses the overhead control account to accumulate both actual and applied overhead.
Calculate the overhead variance for the year.

Answer 1

The overhead variance for Warner Company is a $30,000 unfavourable variance, which means the company applied $30,000 more in overhead than the actual overhead costs.

Step-by-step explanation:

The overhead variance is calculated by subtracting the applied overhead from the actual overhead. In the case of Warner Company, the actual overhead for the past year was $470,000, and the total applied overhead was $500,000 (sum of applied overhead in work-in-process inventory, finished goods inventory, and cost of goods sold).

To find the overhead variance, we use the following formula:

Overhead Variance = Actual Overhead - Applied Overhead

Overhead Variance = $470,000 - $500,000

Overhead Variance = -$30,000

This result indicates that there is a $30,000 unfavourable variance, meaning that Warner Company has over-applied its overhead costs by $30,000.

Answer 2

The overhead variance for the year is $ 30000 and is Favorable/overapplied.

Step-by-step explanation:

Overhead variance = Actual overhead - Applied overhead

= $470,000 - $500,000

= - $30000

Therefore, the overhead variance for the year is $ 30000 and is Favorable/overapplied.