A company uses a predetermined overhead rate based on direc labor hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated its total manufacturing overhead cost at P400,000 and its direct labor-hours at 100,000 hours. The actual overhead cost incurred during the year is P350,000 and the actual direct labor hours incurred on jobs during the year was 90,000 hours. The manufacturing overhead for the year would be
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 uses a predetermined
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