Budgeted Overheads: $360,000
Expected Activity (in direct labour hours): 50000
Actual Activity (in direct labour hours): 51000
Actual Overheads: $400,000

Deluxe Regular
Units Produced: 5000 50000
Prime Costs: $80,000 $600,000
Direct Labour Hours: 5000 46000

What is the predetermined overhead rate based on direct labour hours?
What is the value of the applied overheads?
What value is the under or over applied overhead variance?
What is the unit costs?

1 Pre determined OH Rate
Budgeted : 7.20 per Hour
Actual : 7.84 Per Hour

4 Unit Cost
Deluxe 23.84
Regular 19.22

1. Predetermined OH rate 360000/50000 = $7.20
2. Applied overheads 51000 x 7.20 = $367200
3. Applied overheads - Actual overheads = Under/over applied
367,200 - 400,000 = 32,800 Under applied
4. Unit costs
Deluxe: 80,000 + 5000 x 7.20 = 116,000/5000 = $23.20
Regular: 600,000 + 46000 x 7.20 = 931,200/50000 = $18.624

Unit costs are always calculated on the basis of applied overheads. Over or under applied overheads are disposed of at the end of the year.