A predetermined overhead rate based on direct labor hours at expected actual capacity is used to apply total overhead. Management has estimated that 100,000 direct labor hours will be used next year. What is the predetermined overhead rate per direct labor hour to be used to apply total overhead to the individual jobs next year?
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 manufactures plastic products for the home and restaurant market. The company also does contract work for other customers and uses a
Direct labor hours
50,000
80,000
110,000
Machine hours
40,000
64,000
88,000
Variable OH costs
$100,000
$160,000
$220,000
Fixed OH costs
150,000
150,000
150,000
Total OH costs
$250,000
$310,000
$370,000
A predetermined overhead rate based on direct labor hours at expected actual capacity is used to apply total overhead. Management has estimated that 100,000 direct labor hours will be used next year. What is the predetermined overhead rate per direct labor hour to be used to apply total overhead to the individual jobs next year?
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