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Gallop, Inc. budgeted its variable overhead application rate as $0.25 per direct labor hour. Actual variable...

Gallop, Inc. budgeted its variable overhead application rate as $0.25 per direct labor hour. Actual variable overhead cost for the period is $9,700. If the actual number of labor hours worked during the period are 38,500 and if there is a total unfavorable flexible variable overhead variance of $230, calculate the standard number of direct labor hours allowed for the output achieved by Gallop within this period.

a. 38,500

b. 37,880

c. 37,920

d. 39,720

Can you please indicate the process of finding the answer and any formulas used! (thank you!)

Solutions

Expert Solution

Actual Variable Overhead Cost = $9,700

Standard Variable Overhead Rate = $0.25 per direct labor hour

Actual Number of labor hours worked during the period = 38,500 Hours

Total Flexible Variable Overhead Variance = $230 unfavorable

Actual Variable Overhead - Standard number of direct labor hours allowed for the output achieved by Gallop within this period * Standard Variable Overhead Rate = $230

$9,700 – ( standard number of direct labor hours allowed for the output achieved by Gallop within this period * $0.25) = $230

Standard number of direct labor hours allowed for the output achieved by Gallop within this period * $0.25 = $9,470

Standard number of direct labor hours allowed for the output achieved by Gallop within this period = $9,470 / 0.25

= 37,880 Hours

The correct option is b. 37,880 hours

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ekkarill92 answered 2 years ago
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