Calculate earth company total overhead variance

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Reference no: EM13128261

Earth Company expects to operate at 80% of its productive capacity of 25,000 units per month. At this planned level, the company expects to use 40,000 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate based on direct labor hours. At the 80% capacity level, the total budgeted cost includes $40,000 fixed overhead cost and $280,000 variable overhead cost. In the current month, the company incurred $340,000 actual overhead and 39,000 actual labor hours while producing 19,500 units.

1. Compute Earth Company’s overhead application rate for total overhead.

2. Compute Earth Company’s total overhead variance.

Reference no: EM13128261

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