# Inspired Ltd manufactures spurs. Factory overhead is applied to the pr

Inspired Ltd manufactures spurs. Factory overhead is applied to the production of spurs using a predetermined rate based on budgeted direct labour hours. Budgeted cost of production (for 30,000 units) for the year to 30 June 2015 was:Direct materials\$ 225,000Direct labour (6,000 hours)75,000Fixed factory overhead39,000Variable factory overhead30,000Actual factory overhead incurred in the year to 30 June 2015 was \$72,000. Actual direct labour hours were 6,100.Required:( a ) Calculate the factory overhead application rate (per direct labour hour) for the year.( b ) Calculate the total amount of factory overhead for the year applied to the production of spurs.( c ) Analyse under or over-applied overhead into two variances. Your answer must name the two variances, and indicate whether they are favourable/unfavourable.

# Inspired Ltd manufactures spurs. Factory overhead is applied to the pr

Inspired Ltd manufactures spurs. Factory overhead is applied to the production of spurs using a predetermined rate based on budgeted direct labour hours. Budgeted cost of production (for 30,000 units) for the year to 30 June 2015 was:Direct materials\$ 225,000Direct labour (6,000 hours)75,000Fixed factory overhead39,000Variable factory overhead30,000Actual factory overhead incurred in the year to 30 June 2015 was \$72,000. Actual direct labour hours were 6,100.Required:( a ) Calculate the factory overhead application rate (per direct labour hour) for the year.( b ) Calculate the total amount of factory overhead for the year applied to the production of spurs.( c ) Analyse under or over-applied overhead into two variances. Your answer must name the two variances, and indicate whether they are favourable/unfavourable.