Huckvale Corporation manufactures custom cabinets for kitchens. It uses an actual costing system with two direct-cost categories-direct materials and direct manufacturing labor—and one indirect-cost pool, manufacturing overhead costs. It provides the following information for 2020. (Click the icon to view the information for 2020.) Read the requirement. Begin by calculating the actual manufacturing overhead rate. (Assume the cost allocation base is direct labor hours.) Actual manufacturing overhead rate Data table + Budgeted manufacturing overhead costs Budgeted direct manufacturing labor-hours Actual manufacturing overhead costs Actual direct manufacturing labor-hours ▼ = $ = $ 1,160,000 29,000 hours 1,260,000 28,000 hours X
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.
Actual manufacturing overhead rate can be calculated by dividing the actual manufacturing overhead cost with the actual basis for allocation.
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