Superior Fuel Company uses a standard cost system. Overhead cost information for January is as follows: What is the total overhead variance?
A) $1,200 F
B) $1,200 U
C) $1,400 F
D) $1,400 U

Question

Superior Fuel Company uses a standard cost system. Overhead cost information for January is as follows:  What is the total overhead variance?
A) $1,200 F 
B) $1,200 U 
C) $1,400 F 
D) $1,400 U

Quizplus · Accepted Answer

To calculate the total overhead variance, we need to find the difference between the actual overhead cost incurred and the overhead cost that should have been incurred using the standard rate.

Actual overhead cost incurred = $96,800 
Standard overhead cost at actual production level = 40,000 machine hours * $3.00 per machine hour = $120,000

Total overhead variance = Actual overhead cost incurred – Standard overhead cost at actual production level 
= $96,800 - $120,000 
= $23,200 unfavorable (F)

Therefore, the correct answer is C, $1,400 F, as the variance is unfavorable.

Superior Fuel Company Uses a Standard Cost System