allocating manufacturing overhead
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.
Wright Brothers is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing
Estimated labor cost $449,500
Actual direct labor cost $441,000
Estimated manufacturing overhead $359,600
Actual
Actual direct labor hours $242,000
The OAR when using direct labor hours as the cost driver is:
A)145% of direct labor costs
B)$1.81 per direct labor hour
C)$1.45 per direct labor hour
D)$1.49 per direct labor hour
Wright Brothers is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing overhead. The following information is available for the year ended Dec 31, 2007.
Estimated labor cost $449,500
Actual direct labor cost $441,000
Estimated manufacturing overhead $359,600
Actual manufacturing overhead costs $338,000
Actual direct labor hours $242,000
Manufacturing overhead applied based on direct labor cost is
A)$352,800
B)$359,600
C)$360,000
D)$348,480
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