Superior Fuel Company uses a standard cost system.Overhead cost information for January is as follows: What is the total overhead variance?
A)$1,200 F
B)$1,200 U
C)$1,400 F
D)$1,400 U

Question

Superior Fuel Company uses a standard cost system.Overhead cost information for January is as follows:  What is the total overhead variance?
A)$1,200 F 
B)$1,200 U 
C)$1,400 F 
D)$1,400 U

Quizplus · Accepted Answer

To find the total overhead variance, we need to calculate the difference between the actual overhead cost and the standard overhead cost.

The actual overhead cost is given as $22,500 in the table.

The standard overhead cost is calculated as follows:

Standard rate per direct labor hour = Total budgeted overhead cost / Total budgeted direct labor hours 
= $180,000 / 30,000 hours 
= $6 per hour

Standard overhead cost = Standard rate per direct labor hour x Actual direct labor hours 
= $6 per hour x 4,500 hours 
= $27,000

Total overhead variance = Actual overhead cost - Standard overhead cost 
= $22,500 - $27,000 
= $1,400 F

Therefore, the correct answer is C) $1,400 F.

Superior Fuel Company Uses a Standard Cost System