Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 55000 500 orders Machine Setup Setups 238500 450 setups Machining Machine hours 1337500 125000 MH Assembly Parts 1070000 1000000 parts Inspection Inspections 235000 500 inspections If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is $10.70. $8.14. $13.38. $29.36.
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.
Tidwell Industries has the following
| Activity Cost Pool | Cost Driver | Est. Overhead | Cost Driver Activity | |
| Ordering and Receiving | Orders | $ 55000 | 500 orders | |
| Machine Setup | Setups | 238500 | 450 setups | |
| Machining | Machine hours | 1337500 | 125000 MH | |
| Assembly | Parts | 1070000 | 1000000 parts | |
| Inspection | Inspections | 235000 | 500 inspections |
If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is
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