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Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates overhead to be $620,000, machine hours to be 180,000, and direct labor hours to be 40,000. During February, Morrow has 4,200 direct labor hours and 8,000 machine hours. If the actual overhead for February is $64,700, what is the overhead variance and is it overapplied or underapplied?
A. $400 underapplied B. $200 overapplied C. $1,000 underapplied D. $400 overapplied
Describe the meaning and relevance of interdependence of variances when reporting to managers.
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