Purves Corporation is using a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $121,000 and 10,000 direct labor-hours for the period. The company incurred actual total fixed manufacturing overhead of $113,000 and 10,900 total direct labor-hours during the period. The predetermined overhead rate is closest to: O $10.37 $12.10 O $11.10 O $11.30
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.
predetermined overhead rate is such a rate that estimate ratio of estimated overheads cost to the estimated unit to be allocated. it is used for allocation of expenses across the centres of cost. This can be fixed, variable or semi variable in nature. it is determined before the accounting year to estimate whatever amount of overhead will be required for allocation. whenever at the later stage actual expenses get known then whatever difference arises due to to predetermine rate that is allocated and adjusted.
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