Blue Mountain Company applies overhead on the basis of machine hours. The following data was for the recent year: Estimated annual overhead cost $3000000 Actual annual overhead cost $2970000 Estimated machine hours 300000 Actual machine hours 295000 a) Calculate the appliedoverheadcostfor the year. b) Calculate the under-or overapplication of overhead for the year. c) Explain the reason for the difference in applied overhead costs and actual overhead costs, and how this difference is addressed at year-end.
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.
Blue Mountain Company applies
Estimated annual overhead cost $3000000
Actual annual overhead cost $2970000
Estimated machine hours 300000
Actual machine hours 295000
a) Calculate the appliedoverheadcostfor the year.
b) Calculate the under-or overapplication of overhead for the year.
c) Explain the reason for the difference in applied overhead costs and actual overhead costs, and how this difference is addressed at year-end.
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