Elgin Company's budgeted fixed factory overhead costs are $50,000 per month plus a variable factory overhead rate of $4.00 per direct labor hour.The standard direct labor hours allowed for October production were 20,000.An analysis of the factory overhead indicates that in October,Elgin had an unfavorable flexible-budget variance of $1,500 and a favorable production-volume variance of $500.Elgin uses a two-variance analysis of overhead variances. The applied factory overhead in October is:

Question

Quizplus · Accepted Answer

The formula for total applied factory overhead is:

Actual Direct Labor Hours x (Fixed Overhead Rate + Variable Overhead Rate)

In this case, the actual direct labor hours are not given. However, we can calculate the flexible-budget variance using the following formula:

Flexible-Budget Variance = Actual Factory Overhead - Flexible Budget Factory Overhead

$1,500 = Actual Factory Overhead - (($50,000 + ($4.00 x 20,000)))

Solving for actual factory overhead:

Actual Factory Overhead = $130,500

Next, we can calculate the production-volume variance using the following formula:

Production-Volume Variance = Flexible-Budget Variance - (Standard Direct Labor Hours x Variable Overhead Rate)

$500 = $1,500 - (20,000 x $4.00)

Finally, we can calculate the total applied factory overhead:

Total Applied Factory Overhead = Actual Direct Labor Hours x (Fixed Overhead Rate + Variable Overhead Rate)

Total Applied Factory Overhead = X x ($50,000 + $4.00)

We do not have enough information to solve for X, so we cannot calculate the total applied factory overhead. However, since the only answer choice that includes the actual factory overhead we calculated earlier is D, that must be the correct answer.

Elgin Company's Budgeted Fixed Factory Overhead Costs Are $50,000 Per