Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. Cost Driver Activity Cost Pool Ordering and Receiving Machine Setup Machining Assembly I Inspection Orders $1.20 per direct labor hour. $240 per order. $0.12 per part. $6,834 per order. Setups Machine hours Parts Inspections Est. Overhead $ 120,000 297,000 1,500,000 1,200,000 300,000 Cost Driver Activity 500 orders 450 setups 125,000 MH 1,000,000 parts 500 inspections If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is
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.
Activity-based costing is a method of allocating overheads like salary rent and utility to the cost of the product. The way of allocating overheads based on activity is more logical than the traditional approach. It allocates the overheads to the activities which are the real cause of the overheads.
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