Determine whether overhead was under- or overapplied during the year in the Machining Department.
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.
Determine whether
OVERAPPLIED OVERHEAD
Overapplied Overhead occurs when Company's Budgeted Overhead is more than actual overhead.
Overapplied Overhead is Computed :—
= Applied Overhead - Actual Overhead
UNDERAPPLIED OVERHEAD
Underapplied Overhead occurs when Company's Actual Overhead is more than Budgeted Overhead.
Underapplied Overhead is Computed :—
= Actual overhead - Applied Overhead
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