Standard Costs and Balanced Scorecard

Byrd Company produces one product, a putter called GO-putter. Byrd use a standard cost system and determines that it should take one hour of direct labor to produce one GO-putter. The normal production capacity for this putter is 100,000 units per year. The total budgeted overhead at normal capacity is $850,000 comprising $250;000 of variable costs and $600,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.

During the current year, Byrd produced 95,000 putters, worked 94,000 direct labor hours, and incurred variable overhead costs of $256,000 and fixed overhead costs of $600,000.

Instruction

1. Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
2. Compute the applied overhead for Byrd for the year.
3. Compute the total overhead variance.

Solution