Answer:
a. Predetermined Overhead Rate
Rate = Overhead cost / standard hours of direct labor
Variable Overhead Costs Rate = 182875 / 16625 = 11
Fixed Overhead Costs Rate= 66500 / 16625 = 4
Total Overhead Costs Rate = Variable Overhead Costs + Fixed Overhead Costs
= 11 + 4
= 15
b. Total overhead variance
Overhead costs applied= Overhead * Standard Direct Labor Hours
When Standard Direct Labor Hours= (16625 / 38000 * 70%) * 44600
= (16625 / 26600) * 44600.
= 0.625 * 44600
= 27875 Hours.
i. Variable Overhead Costs = 11 * 27875 = 306625
ii. Fixed Overhead Costs = 4 * 27875 = 111500
iii. Total Overhead Costs = 15 * 27875 = 418125
The company incurred $421,625 actual overhead which is the Actual overhead.
Hence, Total overhead variance= Total Overhead - Costs Actual overhead
= $418,125 - $421,625
= -3500 (Unfavorable)
