CHAPTER 10

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Overhead Application, Fixed and Variable Overhead Variances

Zepol Company is planning to produce 600,000 power drills for the coming year. The company uses direct labor hours to assign overhead to products. Each drill requires 0.75 standard hour of labor for completion. The total budgeted overhead was $1,777,500. The total fixed overhead budgeted for the coming year is $832,500. Predetermined overhead rates are calculated using expected production, measured in direct labor hours. Actual results for the year are:

Actual production (units)		594,000		Actual variable overhead	$928,000
Actual direct labor hours (AH)		446,000		Actual fixed overhead	$835,600

Required:

1. Compute the applied fixed overhead. $fill in the blank 1

2. Compute the fixed overhead spending and volume variances. Enter amounts as positive numbers and select Favorable or Unfavorable.

Spending variance		$fill in the blank 2	FavorableUnfavorable
Volume variance		$fill in the blank 4	FavorableUnfavorable

3. Compute the applied variable overhead. $fill in the blank 6

4. Compute the variable overhead spending and efficiency variances. Enter amounts as positive numbers and select Favorable or Unfavorable.

Spending variance		$fill in the blank 7	FavorableUnfavorable
Efficiency variance		$fill in the blank 9	FavorableUnfavorable