RLW Enterprises estimated that indirect manufacturing costs for the year would be $75 million and that 15,000 machine-hours would be used. (a) Compute the predetermined indirect cost application rate using machine hours as the burden vehicle. (b) Determine the total cost of production for a product with direct material costs of $2 million, direct labor costs of $2.5 million, and 200 machine-hours
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.
RLW Enterprises estimated that indirect
(a) Compute the predetermined indirect cost application rate using machine hours as the burden vehicle.
(b) Determine the total cost of production for a product with direct material costs of $2 million, direct labor costs of $2.5 million, and 200 machine-hours.
A "predetermined rate" is an indirect cost rate that applies to a specific current or future time, typically the fiscal year of the governmental entity.This rate is determined by estimating the costs that will be incurred over the period. Except in extremely extraordinary circumstances, a fixed rate cannot be changed.
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