At the end of the year, Pryor Company provided the following actual information: Overhead S 913,000 Direct labour cost 1, 214, 400 Pryor uses normal costing and applies overhead at the rate of 75 percent of direct labour cost. At the end of the year, Cost of Goods Sold (before adjusting for any overhead variance) was $1,780,000. Required: 1. Calculate the overhead variance for the year. 2. Dispose of the overhead variance by adjusting Cost of Goods Sold.
At the end of the year, Pryor Company provided the following actual information: Overhead S 913,000 Direct labour cost 1, 214, 400 Pryor uses normal costing and applies overhead at the rate of 75 percent of direct labour cost. At the end of the year, Cost of Goods Sold (before adjusting for any overhead variance) was $1,780,000. Required: 1. Calculate the overhead variance for the year. 2. Dispose of the overhead variance by adjusting Cost of Goods Sold.
Chapter1: Financial Statements And Business Decisions
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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:At the end of the year, Pryor Company provided the following actual information: Overhead S
913,000 Direct labour cost 1, 214, 400 Pryor uses normal costing and applies overhead at the
rate of 75 percent of direct labour cost. At the end of the year, Cost of Goods Sold (before
adjusting for any overhead variance) was $1,780,000. Required: 1. Calculate the overhead
variance for the year. 2. Dispose of the overhead variance by adjusting Cost of Goods Sold.
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