Calico Company costs its products using a normal costing system. Overhead is applied on the basis of machine hours. The following information is available for last year: Budget Actual Overhead ................................. $525,000 $497,500 Machine hours......................... 50,000 48,000 Direct labor hours.................... 75,000 72,000 Prime cost................................ $561,750 Units produced ........................ 175,000 Required: 1.What is the predetermined overhead rate? 2.What is the applied overhead for last year? 3.Was overhead over- or underapplied and by how much? 4.What is the total manufacturing cost?
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.
Calico Company costs its products using a normal costing system.
hours. The following information is available for last year:
Budget Actual
Overhead ................................. $525,000 $497,500
Machine hours......................... 50,000 48,000
Direct labor hours.................... 75,000 72,000
Prime cost................................ $561,750
Units produced ........................ 175,000
Required:
1.What is the predetermined overhead rate?
2.What is the applied overhead for last year?
3.Was overhead over- or underapplied and by how much?
4.What is the total
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