The allocation base for overhead is direct labor hours. Data for the year just ended: Estimated total manufacturing overhead cost $ 275,000 Estimated total direct labor hours 25,000 Actual total direct labor hours 27,760 Actual costs for the year: Purchase of raw materials (all direct) $375,000 Direct labor cost $536,300 Manufacturing overhead costs $302,750 Beginning $ Ending Inventories: Raw materials (all direct) 15,000 $ 11,375 2$ 2$ Work in process Finished goods 27,875 22,350 $ 34,600 $ 26,450 Use the data to answer the following. 1. Compute applied overhead and determine the amount of underapplied or overapplied overhead: Actual manufacturing overhead cost $ 302,750 Predetermined overhead rate $11.00 Actual direct labor hours Sheet1
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.
The predetermined overhead rate is calculated as estimated overhead cost divided by estimated base activity.
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