Everett Ltd budgeted $1,488,000 for total overhead. The standard variable overhead rate was $2 per direct labor hour, or $6 per unit, based on an anticipated activity level of 600,000 direct labor hours. During the year 220,000 units were produced. Fixed overhead costs incurred were $300,000. The variable overhead budget variance was $19,800 unfavorable, and the actual variable overhead rate was $2.10 per direct labor hour. The actual variable overhead costs incurred were
A) $1,339,800
B) $1,320,000
C) $1,260,000
D) $1,300,200

Question

Quizplus · Accepted Answer

The actual variable overhead costs incurred can be calculated by first determining the standard variable overhead cost for the actual production, which is 220,000 units x $6 = $1,320,000. The unfavorable variance of $19,800 means the actual costs were higher by this amount, so the actual variable overhead costs incurred were $1,320,000 + $19,800 = $1,339,800.

Everett Ltd Budgeted $1,488,000 for Total Overhead