Applied Costs and Overhead Rate
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Hightower INC., of Aberdeen, Scotland, produces a single produce and uses a standard cost system to help control cost. Manufacturing overhead is applied to production on the basis of standard machine-hours. Please see the attached documents to see the company's flexible budget. Based on their budget the overhead costs should be incurred at an activity level of 18,000 machine-hours (the denominator activity level chosen for the year).
Download the attached document for the necessary data.
1. Compute the predetermined overhead rate for the year. Break it down into variable and fixed cost elements.
2. Show how the 92,000 "Applied costs" figure in the Manufacturing Overhead account was computed.
3. Analyze the 4,500 under applied overhead figure in terms of the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances.
4. Explain the meaning of each variance that you computed in (3) above.
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Solution Summary
The predetermined overhead rate and manufacturing overhead account are calculated.
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