Aaron Company estimates direct labor costs and manufacturing overhead costs for the coming year to be $800,000 and $500,000, respectively. Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 16,000 hours and 10,000 hours, respectively. What is the predetermined overhead allocation rate? A) $80.00 per machine hour B) $31.25 per labor hour C) $81.25 per labor hour D) $50.00 per machine hour
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Aaron Company estimates direct labor
A) $80.00 per machine hour
B) $31.25 per labor hour
C) $81.25 per labor hour
D) $50.00 per machine hour
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