In October, Vaughn Company reports 21,200 actual direct labor hours, and it incurs $118,830 of manufacturing overhead costs. Standard hours allowed for the work done is 23,300 hours. The predetermined overhead rate is $4.95 per direct labor hour. Compute the total overhead variance.

The answer is $3,495F

Explanation:

The formula for computing total overhead variance is:

Actual overhead - overhead applied.

Overhead applied = overhead rate x standard hours allowed for the workdone.

$4.95 x 23,300 hours

=$115,335

Actual overhead is $118,830

Therefore, we have:

$118,830 - $115,335

= $3,495F

The F in the answer means favourable. The actual overhead incurred is greater than the overhead absorbed.

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return

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