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In: Accounting

Li Pong company uses a standard costing system. Last year they incurred $100,000 of Variable Overhead...

Li Pong company uses a standard costing system. Last year they incurred $100,000 of Variable Overhead and $294,000 of Fixed Overhead and had the following variances before closing entries.

FOH Budget Variance - $5,000 F

FOH Volume Variance - $4,000 U

VOH Spending Variance - $4,000 F

VOH Efficiency Variance - $2,000 U

How much overhead was applied to inventory over the course of the year?

(Answer in dollars)

Li Pong company uses a standard costing system. Last year they incurred $100,000 of Variable Overhead and $294,000 of Fixed Overhead and had the following variances before closing entries.

FOH Budget Variance - $5,000 F

FOH Volume Variance - $4,000 U

VOH Spending Variance - $4,000 F

VOH Efficiency Variance - $2,000 U

How much overhead was applied to inventory over the course of the year?

(Answer in dollars)

Solutions

Expert Solution

Solution:

Calculation of Applied Overhead

Applied Fixed Overhead

Budgeted Fixed Overhead variance = Budgeted Fixed Overhead – Actual Fixed Overhead

$5,000 = Budgeted Fixed Overhead - $294,000

Budgeted Fixed Overhead = $294000 + 5000 = $299,000

Budgeted Fixed Overhead - Applied Fixed Overhead = Fixed Overhead Volume Variance

$299,000 – Applied Fixed Overhead = $4,000

Applied Fixed Overhead = $299,000 - $4,000 = $295,000

Applied Variable Overhead

VOH Spending Variance = $4,000 F

Budgeted VOH – Actual VOH = $4,000 F

Budgeted VOH - $100,000 = 4,000

Budgeted VOH = $104,000

Budgeted VOH Efficiency Variance = Budgeted VOH – Applied VOH

2,000 = 104,000 – Applied VOH

Applied VOH = $102,000

Overhead applied to the inventory over the course of the year was = $295,000 + 102,000 = $397,000

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ekkarill92 answered 1 year ago

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