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Victryl Company applies overhead based on direct labor hours. At the beginning of the year, Victryl estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to be 35,000. During February, Victryl has 5,000 direct labor hours and 10,000 machine hours.If the actual overhead for February is $98,300, what is the overhead variance, and is it overapplied or underapplied?a.$1,700 overappliedb.$600 overappliedc.$1,000 underappliedd.$1200 underappliede.$800 overapplied

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Answer:

correct option is a. $1,700 over head applied

Explanation:

given data

overhead = $700,000

machine hours = 200,000

direct labor hours = 35,000

Feb, direct labor hours = 5,000

Feb, machine hours = 10,000

Feb, actual overhead = $98,300

solution

we know overhead rate that is

overhead rate = [tex]\frac{Budget overhead}{allocation base}[/tex]

overhead rate = [tex]\frac{700000}{35000}[/tex]

overhead rate = $20 per hours

and in Feb for 5000 direct labor hour

overhead =  5000 × $20  = $100,000

so

over head applied = $100,000 - $98300

over head applied = $1700

so correct option is a. $1,700 over head applied

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