Caris Company is a manufacturer with two production departments (Machining and Assembly) as well as two support departments (Materials Requisitions and Utility Services). For the last quarter of 2020, Caris’s cost records indicate the following: Material Requisition (MR) Utility Services (US) Machining Assembly Total Budgeted overhead costs $400,000 $2,000,000 $9,456,000 $13,458,000 $25,314,000 Support work supplied by MR (Number of requisitions) 25% 40% 35% 100% Support work supplied by US (Power Cost) 10% 0 30% 60% 100% Allocate the two support departments’ costs to the two operating departments using the following methods: - Step method (allocate MR first)
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.
Caris Company is a manufacturer with two production departments (Machining and
Assembly) as well as two support departments (Materials Requisitions and Utility Services).
For the last quarter of 2020, Caris’s cost records indicate the following:
| Material Requisition (MR) | Utility Services (US) | Machining | Assembly | Total | |
| Budgeted |
$400,000 | $2,000,000 | $9,456,000 | $13,458,000 | $25,314,000 |
| Support work supplied by MR (Number of requisitions) | 25% | 40% | 35% | 100% | |
| Support work supplied by US (Power Cost) | 10% | 0 | 30% | 60% | 100% |
Allocate the two support departments’ costs to the two operating departments using the
following methods:
- Step method (allocate MR first)
Step by step
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