Steel Company uses activity-based costing and reports the following for this year. Allocate overhead costs to a job that uses 40 machine hours and 30 direct labor hours. Activity Budgeted Cost Activity Cost Driver Budgeted Activity Usage Cutting $ 56,000 Machine hours (MH) 2,000 machine hours Assembly 240,000 Direct labor hours (DLH) 6,000 direct labor hours Total $ 296,000
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.
Steel Company uses activity-based costing and reports the following for this year. Allocate
| Activity | Budgeted Cost | Activity Cost Driver | Budgeted Activity Usage | |
|---|---|---|---|---|
| Cutting | $ 56,000 | Machine hours (MH) | 2,000 | machine hours |
| Assembly | 240,000 | Direct labor hours (DLH) | 6,000 | direct labor hours |
| Total | $ 296,000 |
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