Doris Company mfg a unique mobile spare product and the company uses a standard costing system and determines that it should take one hour of direct labor to produce one unit. Normal production capacity for the product is 120,000 units per year. The total budgeted overhead at normal capacity is 1,080,000 comprised of 360,000 of variable costs and 720,000 of fixed costs. The company applies overhead on the basis of direct labor hours. During the current year, it produced 76,600, worked 98,400 direct labor hours, and incurred variable overhead costs of 143,395 and fixed overhead costs of 602,095. Calculate: 1.Predetermined Overhead Rate 2.Compute the applied overhead for the year 3.Compute the total overhead variance.
Doris Company mfg a unique mobile spare product and the company uses a standard costing system and determines that it should take one hour of direct labor to produce one unit. Normal production capacity for the product is 120,000 units per year. The total budgeted overhead at normal capacity is 1,080,000 comprised of 360,000 of variable costs and 720,000 of fixed costs. The company applies overhead on the basis of direct labor hours. During the current year, it produced 76,600, worked 98,400 direct labor hours, and incurred variable overhead costs of 143,395 and fixed overhead costs of 602,095. Calculate: 1.Predetermined Overhead Rate 2.Compute the applied overhead for the year 3.Compute the total overhead variance.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter10: Standard Costing And Variance Analysis
Section: Chapter Questions
Problem 72P: Moleno Company produces a single product and uses a standard cost system. The normal production...
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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.
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Transcribed Image Text:Doris Company mfg a unique mobile spare product and the company uses a standard costing system and
determines that it should take one hour of direct labor to produce one unit. Normal production capacity
for the product is 120,000 units per year. The total budgeted overhead at normal capacity is 1,080,000
comprised of 360,000 of variable costs and 720,000 of fixed costs. The company applies overhead on the
basis of direct labor hours. During the current year, it produced 76,600, worked 98,400 direct labor
hours, and incurred variable overhead costs of 143,395 and fixed overhead costs of 602,095.
Calculate:
1.Predetermined Overhead Rate 2.Compute the applied overhead for the year 3.Compute the total
overhead variance.
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