Indirect labor $ 11,000 Depreciation on plant 48,000 Machinery repair 11,000 Direct labor 75,000 Plant supplies 6,000 Plant utilities 7,000 Advertising 35,000 Sales commissions 27,000
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.
Gell Corporation manufactures computers. Assume that Gell:
• allocates manufacturing
• estimated 12,000 machine hours and $93,000 of
• actually used 16,000 machine hours and incurred the following actual costs:
What is Gell’s predetermined overhead allocation rate?
a. $7.75/machine hour
b. $5.81/machine hour
c. $6.92/machine hour
d. $5.19/machine hour
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