A company has two departments A & B. Overhead is applied based on direct labour hours in department A and machine hours in department B. The following additional information is available: Department A Department B Budgeted Overheads $300,000 $360,000 Budgeted direct labour hours 50,000 40,000 Budgeted direct labour cost $240,000 $330,000 Budgeted machine hours 68,000 80,000 1. Given that the actual overheads were as follows Dept. A Dept. B Direct labour hours 45,000 35,000 Direct labour cost $60,000 $50,000 Machine hours 25,000 75,000 Actual overheads $285,000 $320,000 Calculate the under- or over-applied overheads for each department and for the organization as a whole
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.
A company has two departments A & B. Overhead is applied based on direct labour hours in department A and machine hours in department B.
The following additional information is available:
Department A Department B
Budgeted
Budgeted direct labour hours 50,000 40,000
Budgeted direct labour cost $240,000 $330,000
Budgeted machine hours 68,000 80,000
1. Given that the actual overheads were as follows
Dept. A Dept. B
Direct labour hours 45,000 35,000
Direct labour cost $60,000 $50,000
Machine hours 25,000 75,000
Actual overheads $285,000 $320,000
Calculate the under- or over-applied overheads for each department and for the organization as a whole.
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