Brief Exercise 24-06 In October, Sheridan Company reports 20,900 actual direct labor hours, and it incurs $122,990 of manufacturing overhead costs. Standard hours allowed for the work done is 25,100 hours. The predetermined overhead rate is $4.95 per direct labor hour. Compute the total overhead variance

Total overhead variance = $1,255 F

Explanation:

Total overhead variance is the sum of the expenditure variance and efficiency variance of overhead.

Absorbed overhead = Predetermined overhead rate per hour× Actual labour hour

Expenditure variance

                                                                     $

standard cost of actual hours

= (20,900× $4.95)                                        103,455

Actual overhead                                     =      122,990

Under-absorbed overhead                           19,535 Adverse

Efficiency variance

(Standard hours - Actual hours)× pre-determined rate

(25,100- 20,900)× $4.95 = $20,790 Favorable

Total overhead variance = 20,790 F + 19,535 A =$1,255 F

Total overhead variance = $1,255 F

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