Chapter 23, Problem 17E

To determine

Predetermined overhead rate:

It is a standard rate at which the overhead cost is applied on the production. It is ascertained by dividing the total budgeted manufacturing overhead cost with denominator level of activity or allocation base specified by the company.

Total Variable Overhead Variance:

The overall variance caused by the difference between the variable overhead costs estimated by the company and the actual variable overhead cost incurred is termed as the total variable overhead variance. It is computed by deducting the budgeted variable overhead cost from the actual variable overhead cost incurred for the production.

Total Fixed Overhead Variance:

Total fixed overhead variance is the difference between the budgeted fixed cost and the actual fixed cost incurred on the production. The volume variance and the fixed overhead spending variance are added to ascertain the total fixed overhead variance.

To determine:

1. Predetermined Overhead Rate for total overhead, variable overhead, and fixed overhead.

2. Computation of total variable and fixed overhead variances and determine each as favorable and unfavorable.