Answer to Question #65012 in Other Economics for afzal khan

Question #65012
At the commencement of the financial year a business estimated that their overhead would be $720,000 and their direct labour costs would be $1.44 million. At the end of the financial year the actual data reveals that the overhead was $770,000. Direct labour cost was calculated to be $1.54 million. The business uses normal costing and applies overhead on the basis of direct labour cost. The cost of goods sold before making adjustments for any overhead variance is $856,000. Calculate the overhead variance for the year and dispose of the overhead variance by adjusting the costs of goods sold.
1
Expert's answer
2017-02-02T13:21:12-0500
The overhead variance for the year is the difference between actual variance and estimated overhead.
So, in our case the overhead variance for the year is 770,000 - 720,000 = $50,000.

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