Suns Company incurred actual overhead costs of $305,000 for the year.A budgeted factory-overhead rate of 150% of direct-labor cost was determined at the beginning of the year.Budgeted factory overhead was $300,000, and budgeted direct-labor cost was $200,000.Actual direct-labor cost was $205,000 for the year.The disposition of the variance assuming a material amount) would include a_____.

Question

Quizplus · Accepted Answer

Using the formula for calculating overhead variance:

Actual Factory Overhead Costs - (Budgeted Factory-Overhead Rate x Actual Direct Labor Cost) = Overhead Variance

$305,000 - (1.50 x $205,000) = $2,500 Favorable Variance

Since the variance is favorable, it means that the actual overhead costs are less than the amount that was budgeted. To dispose of the variance, we need to reduce the amount of the Factory Department Overhead Control account by the favorable variance of $2,500. Therefore, we would debit Factory Department Overhead Control for $2,500.

Suns Company Incurred Actual Overhead Costs of $305,000 for the Year.A