Victor Company incurred actual overhead costs of $297,500 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 factory overhead variance for the year was ________.

Question

Quizplus · Accepted Answer

The budgeted factory overhead for the year was $300,000, which is 150% of the budgeted direct labor cost of $200,000. This means that the budgeted factory overhead rate was $1.50 for every direct labor dollar.

The actual direct labor cost was $205,000 for the year, which means that the budgeted factory overhead should have been $307,500 (205,000 x 1.50). However, the actual overhead costs incurred were only $297,500.

This results in an overapplied factory overhead of $10,000 ($307,500 - $297,500), which means that the company allocated more overhead costs to production than it actually incurred. Therefore, the answer is B.

Victor Company Incurred Actual Overhead Costs of $297,500 for the Year.A