Question

In October, Pine Company reports 18,200 actual direct labor hours, and it incurs $217,000 of manufacturing overhead costs. Standard hours allowed for the work done is 21,700 hours. The predetermined overhead rate is $10.15 per direct labor hour. In addition, the flexible manufacturing overhead budget shows that budgeted costs are $8.45 variable per direct labor hour and $43,100 fixed.

Required:
Compute the overhead controllable variance.

Answer 1

$7,295 ( favourable)

Step-by-step explanation:

According to the scenario, computation of the given data are as follows,

Actual direct labor hours = 18,200

Manufacturing OH cost = $217,000

Standard hours allowed = 21,700

Budgeted cost = $8.45

Budgeted fixed cost = $43,100

So, we can calculate overhead controllable variance by using following formula,

Overhead controllable variance = Budgeted OH (actual ) - Actual manufacturing Overhead

Where, Budgeted OH (actual ) = (21,700 × $8.35) + $43,100 = $224,295

By putting the value in the formula, we get

Overhead controllable variance = $224,295 - $217,000

= $7,295 ( favourable)