Company XYZ uses machine hours to allocate its manufacturing overhead. The company estimates that total machine hours to be operated next year are 190,000 hours. The estimated variable overhead is $9 per hour and the estimated fixed overhead costs are $152,000. Calculate the predetermined overhead rate. Select one: O a. $10.80 O b. $9.80 O c. $0.10 O d. $0.80
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.
Predetermined fixed overhead rate = Total estimated fixed overhead costs / total estimated machine hours
= $152,000 / 190,000 hours
= $0.80 per hour
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