Phi Co. normally uses 40,000 direct labor hours for manufacturing 120,000 units of product. Three units are produced in one hour and the direct labor rate is Ph15 per hour. At normal capacity of 40,000 hours, the factory overhead is estimated as follows: Fixed overhead Ph 100,000 and variable overhead Ph120,000. If 30,000 direct labor hours are used, total factory overhead costs would amount to * Ph 165,000 Ph 190,000 Ph 195,000 Ph 220,000
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.
Phi Co. normally uses 40,000 direct labor hours for manufacturing 120,000 units of product. Three units are produced in one hour and the direct labor rate is Ph15 per hour. At normal capacity of 40,000 hours, the factory
Ph 165,000
Ph 190,000
Ph 195,000
Ph 220,000
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