Potestio Incorporated makes a single product-a critical part used in commercial airline seats. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below: The total of the overhead variances is:
A) $34,955 U
B) $45,030 F
C) $34,955 F
D) $45,030 U

Question

Potestio Incorporated makes a single product-a critical part used in commercial airline seats. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below:  The total of the overhead variances is:
A) $34,955 U 
B) $45,030 F 
C) $34,955 F 
D) $45,030 U

Quizplus · Accepted Answer

Without going into details, if you were to calculate all of the variances, you would get the following results:
 11eacbfc_c7f0_1ac4_8ffe_dbc443b7f1d1_TB7552_00 However, a much quicker method of getting the same result is to realize that the manufacturing overhead underapplied or overhead applied equals the sum of the overhead variances, with underapplied overhead being equivalent to an unfavorable variance and overapplied overhead being equivalent to a favorable variance.
 11eacbfc_c7f0_1ac5_8ffe_f146816b6200_TB7552_00

Potestio Incorporated Makes a Single Product-A Critical Part Used in Commercial