Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor hours. At thebeginning of the year it estimated that its total manufacturing overhead would be $134,000 and the totaldirect labor would be 20,000 hours. Its actual total manufacturing overhead for the year was $123,900 andits actual total direct labor was 21,000 hours.Required:Compute the company’s predetermined overhead rate for the year.
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.
Harris Fabrics computes its predetermined
beginning of the year it estimated that its total manufacturing overhead would be $134,000 and the total
direct labor would be 20,000 hours. Its actual total manufacturing overhead for the year was $123,900 and
its actual total direct labor was 21,000 hours.
Required:
Compute the company’s predetermined overhead rate for the year.
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