Ahlheim Corporation has two production departments, Forming and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Assembly Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Forming Assembly Machine-hours 16,000 15,000 Direct labor-hours 2,000 6,000 Total fixed manufacturing overhead cost $ 102,400 $ 55,200 Variable manufacturing overhead per machine-hour $ 2.30 Variable manufacturing overhead per direct labor-hour $ 4.50 During the current month the company started and finished Job T924. The following data were recorded for this job: Job T924: Forming Assembly Machine-hours 70 20 Direct labor-hours 30 40 Direct materials $ 870 $ 385 Direct labor cost $ 630 $ 840The total amount of overhead applied in both departments to Job T924 is closest to: $1,157 $609 $548 $1,705
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.
Ahlheim Corporation has two production departments, Forming and Assembly. The company uses a
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