Al Maha Company has decided to produce two different briefcases: Cotton and leather. They are decided to use activity based costing. Based on next year’s budget, two cost pools have been developed with the following information: Particulars Cotton Leather Overhead assigned Direct labour hours 50,000 100,000 0 OMR Sewing machine hours 1,000 1,000 200,000 OMR Machine setup hours 100 400 100,000 OMR Compute the plant-wide overhead rate if overhead is applied on the basis of direct labour hours. a. OMR 2.5 per labour hour b. None of these c. OMR 2.00 per labour hour d. OMR 3.00 per labour 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.
3
Al Maha Company has decided to produce two different briefcases: Cotton and leather. They are decided to use activity based costing. Based on next year’s budget, two cost pools have been developed with the following information:
|
Particulars |
Cotton |
Leather |
|
|
Direct labour hours |
50,000 |
100,000 |
0 OMR |
|
Sewing machine hours |
1,000 |
1,000 |
200,000 OMR |
|
Machine setup hours |
100 |
400 |
100,000 OMR |
Compute the plant-wide overhead rate if overhead is applied on the basis of direct labour hours.
Step by step
Solved in 2 steps
