Blue Sky Incorporated listed the following data for the current year: Budgeted factory overhead $ 1,271,000 Budgeted direct labor hours 82,000 Budgeted machine hours 41,000 Actual factory overhead 1,201,000 Actual direct labor hours 86,300 Actual machine hours 39,400
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.
Blue Sky Incorporated listed the following data for the current year:
| Budgeted factory overhead | $ 1,271,000 |
|---|---|
| Budgeted direct labor hours | 82,000 |
| Budgeted machine hours | 41,000 |
| Actual factory overhead | 1,201,000 |
| Actual direct labor hours | 86,300 |
| Actual machine hours | 39,400 |
Assuming Blue Sky Incorporated applied overhead based on direct labor hours, the firm's predetermined overhead rate for the current year rounded to 2 decimal places is:
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$14.20 per direct labor hour.
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$14.38 per direct labor hour.
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$15.24 per direct labor hour.
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$15.50 per direct labor hour.
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$15.85 per direct labor hour.
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