Question

Alvarez Company’s output for the current period yields a \(20,000 favorable overhead volume variance and a \)60,400 unfavorable overhead controllable variance. Standard overhead applied to production for the period is $225,000. What is the actual total overhead cost incurred for the period?

Short answer

The actual total overhead cost incurred for the current period is $265,400.

Step-by-step solution

Meaning of Overhead Cost

It refers to the ongoing expenses being incurred by a business entity for producing a product or service. Such expenses are not directly associated with the production process.

Computation of actual total overhead cost

Particulars	Amounts ($)
Standard overhead applied	225,000
Add: Unfavorable overhead controllable variance	60,400
Less: Favorable overhead volume variance	(20,000)
Actual total overhead cost	$265,400