The KIA Motor Company estimated its factory overhead for the next period at Rs. 1,600,000. It is estimated that 80, 000 units will be produced at a normal material cost of Rs. 400, 000. Production will require 20,000 man hours at an estimated wage cost of Rs.800, 000. The machine will run about 40, 000 hours. Compute Applied FOH rate on the following basis. Material Cost Direct Labor Cost Direct Labor Hours Machine hours Units of production
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 KIA Motor Company estimated its factory
- Material Cost
- Direct Labor Cost
- Direct Labor Hours
- Machine hours
- Units of production
- Prime cost
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