Automotive Parts Overstock (APO) has normal budgeted overhead costs of $348,400 and a normal capacity of 52,000 direct labor hours for the first quarter, which are evenly distributed between months. APO allows 1.2 direct labor hours per unit, and the company produced 15,000 units in the second month of the quarter. This took APO 16,500 labor hours. APO had variable overhead costs of $52,200 and fixed overhead of $41,400 costs in the month. What was the overhead variance for the month? A $27,000 favorable. B $27,000 unfavorable. C $16,950 favorable.
Automotive Parts Overstock (APO) has normal budgeted overhead costs of $348,400 and a normal capacity of 52,000 direct labor hours for the first quarter, which are evenly distributed between months. APO allows 1.2 direct labor hours per unit, and the company produced 15,000 units in the second month of the quarter. This took APO 16,500 labor hours. APO had variable overhead costs of $52,200 and fixed overhead of $41,400 costs in the month. What was the overhead variance for the month? A $27,000 favorable. B $27,000 unfavorable. C $16,950 favorable.
Chapter1: Financial Statements And Business Decisions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Automotive Parts Overstock (APO) has
normal budgeted overhead costs of
$348,400 and a normal capacity of 52,000
direct labor hours for the first quarter,
which are evenly distributed between
months. APO allows 1.2 direct labor hours
per unit, and the company produced
15,000 units in the second month of the
quarter. This took APO 16,500 labor hours.
APO had variable overhead costs of
$52,200 and fixed overhead of $41,400
costs in the month. What was the overhead
variance for the month? A $27,000
favorable. B $27,000 unfavorable. C
$16,950 favorable.
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