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

Question

Quizplus · Accepted Answer

The total under- or overapplied overhead is calculated by summing the variances related to overhead: Variable overhead spending (300 F) + Variable overhead efficiency (100 F) + Fixed overhead spending (500 F) - Fixed overhead production volume (1,000 U) = 900 F - 1,000 U = 100 U, which means $100 underapplied.

During the Period Richeleau Produced 1,000 Units of Product