Spacely, Corp. makes sprockets in two models: regular and professional, and wants to refine its costing system by allocating overhead using departmental rates. The estimated $843,100 of manufacturing overhead has been divided into two cost pools: Assembly Department and Packaging Department. The following data has been compiled: Spacely, Corp. Assembly Department Packaging Department Total Overhead costs $550,000 $293,100 $843,100 Machine Hours: Regular Model 153,000 35,100 188,100 Professional Model 352,400 12,600 365,000 Direct Labor Hours: Regular Model 40,300 80,600 120,900 Professional Model 322,700 413,400 736,100 (Round your answers to two decimal places when needed and use rounded answers for all future calculations). 1. Compute the predetermined overhead allocation rates using machine hours as the allocation base for the Assembly Department and direct labor hours for the Packaging Department.
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.
Spacely, Corp. makes sprockets in two models: regular and professional, and wants to refine its costing system by allocating overhead using departmental rates. The estimated $843,100 of manufacturing overhead has been divided into two cost pools: Assembly Department and Packaging Department.
The following data has been compiled:
| Spacely, Corp. | Assembly Department | Packaging Department | Total |
|---|---|---|---|
| Overhead costs | $550,000 | $293,100 | $843,100 |
| Machine Hours: | |||
| Regular Model | 153,000 | 35,100 | 188,100 |
| Professional Model | 352,400 | 12,600 | 365,000 |
| Direct Labor Hours: | |||
| Regular Model | 40,300 | 80,600 | 120,900 |
| Professional Model | 322,700 | 413,400 | 736,100 |
(Round your answers to two decimal places when needed and use rounded answers for all future calculations).
1. Compute the predetermined overhead allocation rates using machine hours as the allocation base for the Assembly Department and direct labor hours for the Packaging Department.
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