chno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital camcorders. Model Annual Sales in Units High F 11,300 Great P 17,300 Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: High F Great P Direct materials $ 39.30 $ 26.70 Direct labor $ 18.90 $ 14.50
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.
Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital camcorders.
|
Model |
Annual Sales in Units |
|
High F |
11,300 |
|
Great P |
17,300 |
Techno uses a volume-based costing system to apply factory
|
|
High F |
Great P |
|
Direct materials |
$ 39.30 |
$ 26.70 |
|
Direct labor |
$ 18.90 |
$ 14.50 |
|
Budget factory overhead: |
|
|
|
|
Engineering and Design |
2,660 |
engineering hours |
$ 425,600 |
|
Quality Control |
13,090 |
inspection hours |
350,190 |
|
Machinery |
33,970 |
machine hours |
541,600 |
|
Miscellaneous Overhead |
26,650 |
direct labor hours |
132,650 |
|
Total |
|
|
$ 1,450,040 |
Techno's controller had been researching activity-based costing and decided to switch to it. A special study determined Techno's two products have the following budgeted activities:
|
|
High F |
Great P |
|
Engineering and design hours |
1,090 |
1,570 |
|
Quality control inspection hours |
5,770 |
7,320 |
|
Machine hours |
20,410 |
13,560 |
|
Labor hours |
12,130 |
14,520 |
What is the overhead application rate using the firm's volume-based costing system? (Rounded to the nearest percent or cents.)
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