SCS Co. uses activity-based costing in their manufacturing process. The company produces two products, ABC and XYZ. SCS has provided their costing department the following information from this year’s budget relating to the production of these two products: ABC XYZ Units to be produced 4,000 6,000 Machine-hours expected 80 160 Direct labor-hours expected 160 240 Materials handling (number of moves) 48 56 Machine setups (number of setups) 16 12 The following costs are expected to be incurred throughout the year and are related to the cost drivers being measured: Expected Total Costs Direct Labor Wages $40,000 Materials handling $3,200 Labor-related overhead $33,600 Machine setups $5,600 What is the expected overhead allocated to product XYZ? NOTE: Round all per-unit costs to the nearest cent. Select one: a. None of the amounts listed. b. $18,116.96 c. $22,560.00 d. $21,883.12 e. $24,283.12
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.
SCS Co. uses activity-based costing in their manufacturing process. The company produces two products, ABC and XYZ. SCS has provided their costing department the following information from this year’s budget relating to the production of these two products:
| ABC | XYZ | |
|---|---|---|
| Units to be produced | 4,000 | 6,000 |
| Machine-hours expected | 80 | 160 |
| Direct labor-hours expected | 160 | 240 |
| Materials handling (number of moves) | 48 | 56 |
| Machine setups (number of setups) | 16 | 12 |
The following costs are expected to be incurred throughout the year and are related to the cost drivers being measured:
| Expected Total Costs | |
|---|---|
| Direct Labor Wages | $40,000 |
| Materials handling | $3,200 |
| Labor-related overhead | $33,600 |
| Machine setups | $5,600 |
What is the expected overhead allocated to product XYZ?
NOTE: Round all per-unit costs to the nearest cent.
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