Sheffield Corp. provided the following information from its accounting records for 2019. Expected production 40000 labor hours Actual production 36000 labor hours Budgeted overhead $900000 Actual overhead $860000 How much is the overhead application rate if Sheffield Corp. bases the rate on direct labor hours? $25.00 per hour $22.50 per hour $23.89 per hour $21.50 per hour
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.
Sheffield Corp. provided the following information from its accounting records for 2019.
| Expected production | 40000 labor hours |
| Actual production | 36000 labor hours |
| Budgeted |
$900000 |
| Actual overhead | $860000 |
How much is the overhead application rate if Sheffield Corp. bases the rate on direct labor hours?
Overhead application rate based on direct labor hour = Budgeted overhead / Expected labor hour
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