Predetermined Overhead Rate, Overhead Application At the beginning of the year, Estes Company estimated the following costs: Overhead $450,000 Direct labor cost 600,000 Estes uses normal costing and applies overhead on the basis of direct labor cost. (Direct labor cost is equal to total direct labor hours worked multiplied by the wage rate.) For the month of September, direct labor cost was $46,300. Required: 1. Calculate the predetermined overhead rate for the year. Enter the percentage as a whole number. % of direct labor cost 2. Calculate the overhead applied to production in September.
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.
Predetermined
At the beginning of the year, Estes Company estimated the following costs:
| Overhead | $450,000 |
| Direct labor cost | 600,000 |
Estes uses normal costing and applies overhead on the basis of direct labor cost. (Direct labor cost is equal to total direct labor hours worked multiplied by the wage rate.) For the month of September, direct labor cost was $46,300.
Required:
1. Calculate the predetermined overhead rate for the year. Enter the percentage as a whole number.
% of direct labor cost
2. Calculate the overhead applied to production in September.
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