Question

Victryl Company applies overhead based on direct labor hours. At the beginning of the year, Victryl estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to be 35,000. During February, Victryl has 5,000 direct labor hours and 10,000 machine hours. If the actual overhead for February is $98,300, what is the overhead variance, and is it overapplied or underapplied? a. $1200 underapplied Ob. $1,000 underapplied Oc. $600 overapplied Od, $800 overapplied e. $1,700 overapplied Ned All work saved.

Answer 1

Solution:

Estimated Overhead is $700,000

Estimated Direct Labour hours is 35,000

So Budgeted cost per hour is 700,000/35,000 = $20 per direct labour hour

Direct labor hour in February 5,000 hours

So allocated direct labour hours is 5,000*20= $100,000

Actual overhead is $98,300

So overhead is over-applied by $1,700

So, the correct answer is e.