During the period Cash Spinner produced 2,000 units of product. The flexible budget for standard costs is: $\begin{array} { l r }
\quad\quad\text { Direct materials } & \$ 43,000 \
\quad\quad\text { Direct labor } & 67,000 \
\quad\quad\text { Variable overhead } & 30,000 \
\quad\quad\text { Fixed overhead } & 25,000 \
\text { Variances for the period are: } & \
\quad\quad\text { Direct materials price } & \$ 400 \mathrm { U } \
\quad\text { Direct materials efficiency } & 500 \mathrm {~F} \
\quad\text { Direct labor price } & 600 \mathrm {~F} \
\quad\text { Direct labor efficiency } & 200 \mathrm { U } \
\quad\text { Variable overhead spending } & 300 \mathrm {~F} \
\quad\text { Variable overhead efficiency } & 100 \mathrm {~F} \
\quad\text { Fixed overhead spending } & 500 \mathrm {~F} \
\quad\text { Fixed overhead production volume } & 1,000 \mathrm { U }
\end{array}$

The direct materials inventory increased during the period by 500 (at standard cost). The total under- or overapplied overhead for the period was:

Question

During the period Cash Spinner produced 2,000 units of product. The flexible budget for standard costs is: $\begin{array} { l r } 
\quad\quad\text { Direct materials } & \$ 43,000 \
\quad\quad\text { Direct labor } & 67,000 \
\quad\quad\text { Variable overhead } & 30,000 \
\quad\quad\text { Fixed overhead } & 25,000 \
\text { Variances for the period are: } & \
\quad\quad\text { Direct materials price } & \$ 400 \mathrm { U } \
\quad\text { Direct materials efficiency } & 500 \mathrm {~F} \
\quad\text { Direct labor price } & 600 \mathrm {~F} \
\quad\text { Direct labor efficiency } & 200 \mathrm { U } \
\quad\text { Variable overhead spending } & 300 \mathrm {~F} \
\quad\text { Variable overhead efficiency } & 100 \mathrm {~F} \
\quad\text { Fixed overhead spending } & 500 \mathrm {~F} \
\quad\text { Fixed overhead production volume } & 1,000 \mathrm { U }
\end{array}$

The direct materials inventory increased during the period by 500 (at standard cost). The total under- or overapplied overhead for the period was:

Quizplus · Accepted Answer

The total under- or overapplied overhead is calculated by adding the variances for both variable and fixed overheads. For variable overhead, the spending variance is $300 F and the efficiency variance is $100 F, totaling $400 F. For fixed overhead, the spending variance is $500 F and the production volume variance is $1000 U, resulting in a net variance of $500 U. Combining these, $400 F - $500 U = $100 U, meaning the overhead was $100 underapplied.

During the Period Cash Spinner Produced 2,000 Units of Product