Laura Company calculates its predetermined rates using practical volume, which is 288,000 units. The standard cost system allows 2 direct labor hours per unit produced. Overhead is applied using direct labor hours. The total budgeted overhead is P3,168,000, of which P864,000 is fixed overhead. The actual results for the year are as follows: Units produced: 280,000 Direct labor hours 570,000 Direct labor rate P9 Variable overhead P2,320,000 Fixed overhead P872,000 Required: Determine the following: predetermined fixed OH rate per hour predetermined variable OH rate per hour applied fixed OH 7. variable OH efficiency variance fixed OH spending variance fixed OH volume variance variable OH spending variance
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.
Laura Company calculates its predetermined rates using practical volume, which is 288,000 units. The
Units produced: 280,000
Direct labor hours 570,000
Direct labor rate P9
Variable overhead P2,320,000
Fixed overhead P872,000
Required: Determine the following:
- predetermined fixed OH rate per hour
- predetermined variable OH rate per hour
- applied fixed OH 7. variable OH efficiency variance
- fixed OH spending variance
- fixed OH volume variance
- variable OH spending variance
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