Exercise #1 The following information is estimated by Blue Sea Ltd’s accountant for the upcoming financial year: Sales revenue 3,480,000 Machine hours 54,000 Direct labour hours 81,000 Direct labour rate $22.00 Manufacturing overhead 1,326,000 Required: Calculate the predetermined overhead rates assuming that the cost driver is: Direct labour hours Direct labour costs Machine hours
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.
Exercise #1
The following information is estimated by Blue Sea Ltd’s accountant for the upcoming financial year:
|
Sales revenue |
3,480,000 |
|
Machine hours |
54,000 |
|
Direct labour hours |
81,000 |
|
Direct labour rate |
$22.00 |
|
Manufacturing |
1,326,000 |
Required:
Calculate the predetermined overhead rates assuming that the cost driver is:
- Direct labour hours
- Direct labour costs
- Machine hours
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