Answered: PepsiCo Tools includes 5hours of direct…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter8: Standard Costs And Variances

Section: Chapter Questions

Problem 7PB: Marymount Company makes one product. In the month of April, it made 3,500 units. Workers were paid...

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PepsiCo Tools includes 5hours of direct labor at $15 per hour in the standard cost of Product PP. The predetermined overhead rate is $26 per direct labor hour. During October, the company incurred 5,400 hours of direct labor at an average rate of $14.80 per hour and $134,800 of manufacturing overhead costs. It produced 1,100 units. Compute the total overhead variance.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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