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    Standard cost system

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    The standard cost system unfavorable variances are also equivalent to under-applied over head as to favorable variances are equivalent to over-applied overhead.

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    Solution Preview

    Hi,
    Please see the response to your posting as below:

    Under applied cost occurs when actual cost is greater than the allocated amount of overhead cost.
    Example:
    Let the standard overhead cost per unit be $2 per unit
    And ...

    Solution Summary

    Solution explains how the standard cost system unfavorable variances are also equivalent to under-applied over head as to favorable variances are equivalent to over-applied overhead.

    $2.19

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