Advent Corporation started to produce automated garbage bins. The company uses a standard cost system and determines that it should take two hours of direct labour to produce one garbage bin. The normal production capacity for the company’s bins is 62,500 units per year. The total budgeted overhead at normal capacity is $450,000 comprised of $200,000 of variable costs and $250,000 of fixed costs. Advent Corporation applies overhead on the basis of direct labour hours. During the current year, Advent Corporation produced 95,000 bins, worked 99,000 direct labour hours, and incurred variable overhead costs of $265,000 and fixed overhead costs of $326,200. Required: a. Compute the predetermined variable overhead rate and the predetermined fixed overhead rate. b. Compute the applied overhead for Advent for the year. c. Compute the total overhead variance
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question 1 Part II
Advent Corporation started to produce automated garbage bins. The company uses a
The normal production capacity for the company’s bins is 62,500 units per year. The total budgeted
costs. Advent Corporation applies overhead on the basis of direct labour hours.
During the current year, Advent Corporation produced 95,000 bins, worked 99,000 direct labour hours,
and incurred variable overhead costs of $265,000 and fixed overhead costs of $326,200.
Required:
a. Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
b. Compute the applied overhead for Advent for the year.
c. Compute the total overhead variance.
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