Hanson Produces Pressure Washers Actual Production for the Year Totaled 62,000 Units

question 40

Multiple Choice

Hanson produces pressure washers. The detail for the overhead estimates follows: $\begin{array}{lrr}\text { Variable Overhead } &\text { Budget } @ 60,000 \text { units }& \text { Actual Costs }\\\hline \text { Indirect materials } & \$ 480,000 & \$ 469,500 \\\text { Utilities } & 120,000 & 93,000 \\\text { Maintenance } & 180,000 & 224,000 \\\text { Total variable overhead } & 780,000 & 786,500\\\\ \text { Fixed Overhead }\\\hline \text { Supervisor salaries } & 125,000 & 127,000 \\\text { Depreciation } & 150,000 & 145,000 \\\text { Other fixed overhead } & 25,000 & 26,000 \\\text { Total fixed overhead } & 300,000 & 298,000 \\\text { Total overhead costs } & \$ 1,080,000 & \$ 1,084,500\end{array}$ Actual production for the year totaled 62,000 units. How much is the overhead volume variance?

• A) $72,000 favorable
• B) $77,580 favorable
• C) $63,940 favorable
• D) $74,000 favorable

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Definitions:

Conversion Cost

The total expense incurred by a company to convert raw materials into finished products, comprising labor costs and manufacturing overhead.

Conversion Costs

Combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished products.

FIFO Method

An inventory valuation method where the first items acquired are the first ones sold, used to calculate the cost of goods sold and ending inventory.

Direct Materials Costs

The expenses incurred for raw materials that are directly involved in the manufacturing of products.