Action corporation, which applies manufacturing overhead on the basis of labor hours, has provided the following data for its most recent year of operations. Estimated labor hours were 3,900. Actual labor hours were 3800. Note that labor hours are used. Estimated manufacturing overhead $137,080 Estimated machine-hours 3,800 Actual manufacturing overhead $137,000 Actual machine-hours 3,780 The applied manufacturing overhead for the year is closest to: $136,269 $138,348 $135,513 $133,565 None of the above
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.
Action corporation, which applies manufacturing
| Estimated manufacturing overhead | $137,080 |
| Estimated machine-hours | 3,800 |
| Actual manufacturing overhead | $137,000 |
| Actual machine-hours | 3,780 |
The applied manufacturing overhead for the year is closest to:
$136,269
$138,348
$135,513
$133,565
None of the above
Please show work.
Predetermined overhead rate = Estimated manufacturing overhead / Estimated labor hours
= $137,080 / 3,900 hours
= $35.15 per hour
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