Folson Company is planning to produce 4,250,000 speakers for the coming year.Actual production was 4,000,000 speakers.Each speaker requires 0.80 direct labor hours per unit.Predetermined overhead rates are calculated using expected production,measured in direct labor hours.The budgeted variable overhead for the coming year is $680,000.The actual variable overhead incurred was $714,000.The applied variable overhead for the year is

Question

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The predetermined overhead rate is calculated using the expected direct labor hours. Since the problem doesn't give us the predetermined overhead rate, we cannot calculate the applied variable overhead directly. However, we do know that the budgeted variable overhead for the year is $680,000, which means that the predetermined overhead rate must be:
Predetermined Overhead Rate = Budgeted Variable Overhead ÷ Budgeted Direct Labor Hours
Predetermined Overhead Rate = $680,000 ÷ (4,250,000 x 0.80)
Predetermined Overhead Rate = $0.20 per direct labor hour
To calculate the applied variable overhead, we simply multiply the actual direct labor hours by the predetermined overhead rate:
Applied Variable Overhead = Actual Direct Labor Hours x Predetermined Overhead Rate
Applied Variable Overhead = 4,000,000 x 0.80 x $0.20
Applied Variable Overhead = $640,000

Folson Company Is Planning to Produce 4,250,000 Speakers for the Coming