a) Determine the following predetermined factory overhead rates under each of the following methods: Direct labor cost Direct labor hours Machine hours b) Determine the under- or overapplied factory overhead under each of the following methods: Direct labor cost Direct labor hours Machine hours.
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 controller has asked you to examine different distribution methods for applying factory
The following information was taken from the annual budget:
|
|
|
|
Direct labor hours |
84,000 |
|
Machine hours |
120,000 |
|
|
|
|
|
|
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Direct labor |
$525,000 |
|
Direct materials |
180,000 |
|
Indirect labor |
75,000 |
|
Electric power |
48,000 |
|
Payroll taxes |
12,600 |
|
Machine maintenance and repair |
9,200 |
|
Factory supplies |
16,000 |
|
Factory heat and light |
14,000 |
|
Depreciation, taxes, and insurance: |
|
|
Factory buildings |
135,000 |
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Machinery |
320,200 |
|
|
$1,335,000 |
Actual results for the year follow:
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Direct labor hours |
85,000 |
|
Machine hours |
110,000 |
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|
|
|
Manufacturing costs: |
|
|
Direct labor |
$ 540,000 |
|
Direct material |
200,000 |
|
Factory overhead |
625,000 |
|
|
$1,365,000 |
Using the information above:
- a) Determine the following predetermined factory overhead rates under each of the following methods:
- Direct labor cost
- Direct labor hours
- Machine hours
- b) Determine the under- or overapplied factory overhead under each of the following methods:
- Direct labor cost
- Direct labor hours
- Machine hours.
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