Your Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine-hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates: Dept. A Dept. B Direct labor cost $56,000 $33,000 Manufacturing overhead $67,200 $45,000 Direct labor hours 8,000 9,000 Machine hours 4,000 15,000 What predetermined overhead rate would be used in Department A?
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.
Your Company uses a predetermined
| Dept. A | Dept. B | |
| Direct labor cost | $56,000 | $33,000 |
| Manufacturing overhead | $67,200 | $45,000 |
| Direct labor hours | 8,000 | 9,000 |
| Machine hours | 4,000 | 15,000 |
What predetermined overhead rate would be used in Department A?
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