Required:Calculate the overhead variance and explain why it is favorable or unfavorable #W #2ansSportsman, Inc. produces different sizes of basketballs. The following costs wereincurred during the year for PBA-sized basketball production.P81,250 (23% is indirect)87,500 (27% is indirect)70,000 (including indirect materialsand indirect labor)Problem 5MaterialsLaborActual Factory overheadSelling expensesGeneral and Administrative expenses3,25023,250Sportsman applies overhead to production at 100% of direct labor cost. There wereno work in process at the end of the year and there were no finished goods inventoryat the beginning. 5,000 units were produced, and 90% of the units produced weresold.

The formula for overhead variance: Overhead variance=Standard Factory Overhead-Actual Factory…

#W #2 Problem 5 Sportsman, Inc. produces different sizes of basketballs. The following costs were incurred during the year for PBA-sized basketball production. P81,250 (23% is indirect) 87,500 (27% is indirect) 70,000 (including indirect materials and indirect labor) Materials Labor Actual Factory overhead Selling expenses General and Administrative expenses 3,250 23,250 Sportsman applies overhead to production at 100% of direct labor cost. There were no work in process at the end of the year and there were no finished goods inventory at the beginning. 5,000 units were produced, and 90% of the units produced were sold.

#W #2 Problem 5 Sportsman, Inc. produces different sizes of basketballs. The following costs were incurred during the year for PBA-sized basketball production. P81,250 (23% is indirect) 87,500 (27% is indirect) 70,000 (including indirect materials and indirect labor) Materials Labor Actual Factory overhead Selling expenses General and Administrative expenses 3,250 23,250 Sportsman applies overhead to production at 100% of direct labor cost. There were no work in process at the end of the year and there were no finished goods inventory at the beginning. 5,000 units were produced, and 90% of the units produced were sold.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Required:
Calculate the overhead variance and explain why it is favorable or unfavorable

#W #2
ans
Sportsman, Inc. produces different sizes of basketballs. The following costs were
incurred during the year for PBA-sized basketball production.
P81,250 (23% is indirect)
87,500 (27% is indirect)
70,000 (including indirect materials
and indirect labor)
Problem 5
Materials
Labor
Actual Factory overhead
Selling expenses
General and Administrative expenses
3,250
23,250
Sportsman applies overhead to production at 100% of direct labor cost. There were
no work in process at the end of the year and there were no finished goods inventory
at the beginning. 5,000 units were produced, and 90% of the units produced were
sold.

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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