Question

Novak Company produces one product, a putter called GO-Putter. Novak uses a standard cost system and...

Novak Company produces one product, a putter called GO-Putter. Novak uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 110,000 units per year. The total budgeted overhead at normal capacity is $1,045,000 comprised of $385,000 of variable costs and $660,000 of fixed costs. Novak applies overhead on the basis of direct labor hours.

During the current year, Novak produced 74,000 putters, worked 84,600 direct labor hours, and incurred variable overhead costs of $140,600 and fixed overhead costs of $644,000.

Compute the predetermined variable overhead rate and the predetermined fixed overhead rate. (Round answers to 2 decimal places, e.g. 2.75.)

Variable

Fixed

Predetermined Overhead Rate $

$

Compute the applied overhead for Novak for the year.
Overhead Applied $

Compute the total overhead variance.
Total Overhead Variance $

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Answer #1
Variable Fixed
Predetermined overhead rate

= (385,000/110,000)

= 3.5

= (660,000/110,000)

= 6

.

Overhead applied (3.5+6)*74,000 703,000

.

Total Overhead variance

703,000 - (140,600+644,000)

81,600 Unfavorable
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