Simplex Company has the following estimated costs for next year: Direct materials $15,000 Direct labor $55,000 Sales commissions $75,000 Salary of production supervisor $35,000 Indirect materials $5,000 Advertising expense $11,000 Rent of factory equipment $16,000 Simplex estimates that 10,000 direct labor and 16,000 machine-hours will be worked during the year. If overhead in applied on the basis of machine hours, the overhead rate per hour will be:
Simplex Company has the following estimated costs for next year: Direct materials $15,000 Direct labor $55,000 Sales commissions $75,000 Salary of production supervisor $35,000 Indirect materials $5,000 Advertising expense $11,000 Rent of factory equipment $16,000 Simplex estimates that 10,000 direct labor and 16,000 machine-hours will be worked during the year. If overhead in applied on the basis of machine hours, the overhead rate per hour will be:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Simplex Company has the following estimated costs for next year:
Direct materials $15,000
Direct labor $55,000
Sales commissions $75,000
Salary of production supervisor $35,000
Indirect materials $5,000
Advertising expense $11,000
Rent of factory equipment $16,000
Simplex estimates that 10,000 direct labor and 16,000 machine-hours will be worked during the year.
If overhead in applied on the basis of machine hours, the overhead rate per hour will be:
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