Richards Manufacturing estimates the following activity for the coming year: ⚫ expected production 20 000 units ⚫ expected direct labour hours 20 000 hours ⚫ expected manufacturing overhead $200 000. Manufacturing overhead is allocated on the basis of direct labour hours. At the end of the financial period, the following information was collected: ⚫ direct labour hours 18 000 hours ⚫ manufacturing overhead $240 000. a. Calculate the predetermined manufacturing overhead rate at the beginning of the year. b. Calculate the actual manufacturing overhead rate for the year.
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.
Richards Manufacturing estimates the following activity for the coming year:
⚫ expected production 20 000 units
⚫ expected direct labour hours 20 000 hours ⚫ expected manufacturing
Manufacturing overhead is allocated on the basis of direct labour hours. At the end of the financial period, the following information was collected:
⚫ direct labour hours 18 000 hours ⚫ manufacturing overhead $240 000.
a. Calculate the predetermined manufacturing overhead rate at the beginning of the year.
b. Calculate the actual manufacturing overhead rate for the year.
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