Rhodium Company is planning to produce 5,000,000 speakers for the coming year.Actual production was 3,000,000 speakers.Each speaker requires 0.50 direct labor hours per unit.Predetermined overhead rates are calculated using expected production, measured in direct labor hours.The budgeted variable overhead for the coming year is $500,000.The actual variable overhead incurred was $650,000.The applied variable overhead for the year is:

Question

Quizplus · Accepted Answer

Applied variable overhead = Standard variable overhead rate* × Standard hours for actual production = $0.20 × (3,000,000 × 0.50 hrs.) = $300,000
*Standard variable overhead rate = Budgeted variable overhead ÷ Budgeted direct labor hours**
= $500,000 / 25,00,000 = $0.20 
**Budgeted direct labor hours = Budgeted production × Labor hours per unit
= 5,000,000 × 0.50 = 25,00,000 hours

Rhodium Company Is Planning to Produce 5,000,000 Speakers for the Coming