The Henry company made the following data available from its accounting records and reports. 600,000 estimated factory overhead = Rs.3.00 200,000 estimated direct labor hours Further analysis indicates that one-third of the rate is variable cost oriented. During the year, the company worked 210,000 direct labor hours and actual factory overhead expenditures were Rs.631,000. Requirement: Fixed FOH Under or overapplied FOH Spending Variance
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.
The Henry company made the following data available from its accounting records and reports.
- 600,000 estimated factory
overhead = Rs.3.00
200,000 estimated direct labor hours
- Further analysis indicates that one-third of the rate is variable cost oriented.
- During the year, the company worked 210,000 direct labor hours and actual factory overhead expenditures were Rs.631,000.
Requirement:
- Fixed FOH
- Under or overapplied FOH
- Spending Variance
- Volume variance
- Solve the problem if variable cost is 2/3 of applied rate.
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Solved in 4 steps