During the period Richeleau produced 1,000 units of product. The flexible budget for standard costs is: $$\begin{array} { l r }
\text { Direct materials } & \$ 43,000 \
\text { Direct labour } & 67,000 \
\text { Variable overhead } & 30,000 \
\text { Fixed overhead } & 25,000 \
\quad \text { Variances for the period are: } & \
\text { Direct materials price } & 400 \mathrm { U } \
\text { Direct materials efficiency } & 500 \mathrm {~F} \
\text { Direct labour price } & 600 \mathrm {~F} \
\text { Direct labour efficiency } & 200 \mathrm { U } \
\text { Variable overhead spending } & 300 \mathrm {~F} \
\text { Variable overhead efficiency } & 100 \mathrm {~F} \
\text { Fixed overhead spending } & 500 \mathrm {~F} \
\text { Fixed overhead production volume } & 1,000 \mathrm { U }
\end{array}$$ The total under- or overapplied overhead for the period was:
A) $400 overapplied
B) $500 underapplied
C) $900 overapplied
D) $100 underapplied

Question

During the period Richeleau produced 1,000 units of product. The flexible budget for standard costs is: $$\begin{array} { l r } 
\text { Direct materials } & \$ 43,000 \
\text { Direct labour } & 67,000 \
\text { Variable overhead } & 30,000 \
\text { Fixed overhead } & 25,000 \
\quad \text { Variances for the period are: } & \
\text { Direct materials price } & 400 \mathrm { U } \
\text { Direct materials efficiency } & 500 \mathrm {~F} \
\text { Direct labour price } & 600 \mathrm {~F} \
\text { Direct labour efficiency } & 200 \mathrm { U } \
\text { Variable overhead spending } & 300 \mathrm {~F} \
\text { Variable overhead efficiency } & 100 \mathrm {~F} \
\text { Fixed overhead spending } & 500 \mathrm {~F} \
\text { Fixed overhead production volume } & 1,000 \mathrm { U }
\end{array}$$ The total under- or overapplied overhead for the period was:
A) $400 overapplied
B) $500 underapplied
C) $900 overapplied
D) $100 underapplied

Quizplus · Accepted Answer

The total under- or overapplied overhead is calculated by adding the variances for variable and fixed overheads. Variable overhead spending and efficiency variances are both favorable (F), reducing the overhead by $300 + $100 = $400. The fixed overhead spending variance is also favorable by $500, further reducing the overhead. However, there's a $1,000 unfavorable (U) variance for fixed overhead production volume, increasing the overhead. The net effect is $1,000 - $400 - $500 = $100 underapplied.

During the Period Richeleau Produced 1,000 Units of Product The Total Under- or Overapplied Overhead for the Period Was