Manufacturing Overhead Variances

# Manufacturing Overhead Variances - MANUFACTURING OVERHEAD...

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MANUFACTURING OVERHEAD VARIANCES The  total overhead variance  is the difference between the actual overhead costs and overhead costs  applied based on standard hours allowed . As indicated in Illustration  22-8 , Xonic incurred overhead  costs of \$10,900 to produce 1,000 gallons of Weed-O in June. The computation of the actual  overhead is comprised of a variable and a fixed component. Illustration  22-20  shows this  computation.  Illustration 22-20    Actual overhead costs To find the total overhead variance in a standard costing system, we determine the overhead costs  applied based on standard hours allowed.  Standard hours allowed  are the hours that  should  have  been worked for the units produced. Because it takes two hours of direct labor to produce one gallon  of Weed-O, for the 1,000-gallon Weed-O order, the standard hours allowed are 2,000 hours (1,000  gallons  ×  2 hours). We then apply the predetermined overhead rate to the 2,000 standard hours

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