Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below: Estimated machine-hours Estimated variable manufacturing overhead Estimated total fixed manufacturing overhead 72,500 24 3.20 per machine-hour $838,700 The predetermined overhead rate for the recently completed year was closest to:
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.
Predetermined overhead rates are used to allocate the indirect cost. It can be allocated on the basis of machine hour, labor hour, units, etc.
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