Smith Foundry in Columbus, Ohio, uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the year, the company expected to incur the following: At the end of the year, the company had actually incurred the following: Requirements Compute Smith’s predetermined manufacturing overhead rate. How much manufacturing overhead was allocated to jobs during the year? How much manufacturing overhead was incurred during the year? Is manufacturing overhead underallocated or overallocated at the end of the year? By how much? Were the jobs overcosted or undercosted? By how much?
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.
Smith Foundry in Columbus, Ohio, uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the year, the company expected to incur the following:
At the end of the year, the company had actually incurred the following:
Requirements
- Compute Smith’s predetermined manufacturing overhead rate.
- How much manufacturing overhead was allocated to jobs during the year?
- How much manufacturing overhead was incurred during the year? Is manufacturing overhead underallocated or overallocated at the end of the year? By how much?
- Were the jobs overcosted or undercosted? By how much?
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