Cheng Co. reports the following information for the coming year. Determine its (a) rate per hour of direct labor (in $) and (b) materials markup (in %). Direct labor rate, including fringe benefits . $50 per DLH Annual direct labor hours . 3,800 hours Annual direct materials purchases $560,000 Annual overhead costs: Materials purchasing, handling, and storage . $39,200 Non-materials related overhead . $114,000 Target profit margin (on both labor and materials) . 30%
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.
Cheng Co. reports the following information for the coming year. Determine its (a) rate per hour of direct
labor (in $) and (b) materials markup (in %).
Direct labor rate, including
Annual direct labor hours . 3,800 hours
Annual direct materials purchases $560,000
Annual overhead costs:
Materials purchasing, handling, and storage . $39,200
Non-materials related overhead . $114,000
Target profit margin (on both labor and materials) . 30%
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