Factory Overhead Application. St. Louis Sounds Inc. manufactures audio equipment. The company estimates the following costs at normal capacity and other items for the coming period: Direct materials $300,000 Direct labor 520,000 Factory overhead (fixed) 300,000 Factory overhead (variable) 240,000 Normal capacity 100,000 direct labor hours Expected production 80,000 direct labor hours Required: Compute the overhead application rate for fixed, variable, and total overhead per direct labor hour, using both the normal capacity and the expected actual capacity activity levels.
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.
Factory
Direct materials $300,000
Direct labor 520,000
Factory overhead (fixed) 300,000
Factory overhead (variable) 240,000
Normal capacity 100,000 direct labor hours
Expected production 80,000 direct labor hours
Required: Compute the overhead application rate for fixed, variable, and total overhead per direct labor hour, using both the normal capacity and the expected actual capacity activity levels.
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