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Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:
Standard Quantity
Standard Price or Rate
Standard Cost
Direct materials
2.5 pounds
$6.50 per pound
$16.25
Direct labor
0.6 hours
$20 per hour
$12.0
Variable manufacturing overhead
$4.75 per hour
$2.85
During March, the following activity was recorded by the company:
The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for March is:
$68,450 U$29,300 F$29,300 U$68,450 F
the amount of overhead applied to the product exceeds the amount incurred is the difference called underapplied
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