ABC Co. makes two products A1 and B2. The products required direct materials, direct labor, and overhead. The following information refers to operations expected next month: Revenue Direct material Direct labor Overhead: Direct material related Direct labor related $100,000 30,000 40,000 A1 Compute the direct material related overhead rate for next month. 15% of direct-labor cost 15% of direct-materials cost 30% of direct-materials cost 30% of direct-labor cost $300,000 60,000 95,000 B2 $400,000 90,000 135,000 13,500 40,500 Total
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.
ABC Co. makes two products A1 and B2. The products required direct materials, direct labor, and
| A1 | B2 | Total | |
| Revenue | $100,000 | $300,000 | $400,000 |
| Direct material | 30,000 | 60,000 | 90,000 |
| Direct labor | 40,000 | 95,000 | 135,000 |
| Overhead: | |||
| Direct material related | 13,500 | ||
| Direct labor related |
40,500 |
Compute the direct material related overhead rate for next month.
15% of direct-labor cost
15% of direct-materials cost
30% of direct-materials cost
30% of direct-labor cost
PREDETERMINED OVERHEAD RATE
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