Overhead Variance (Over-or Underapplied), Closing to cost of goods sold At the end of the year, Eates Company provided the following actual information: Overhead $412,600 Direct labor cost 532,000 Estes uses normal costing and applies overhead at the rate 75% of direct labor cost, At the end of the year, Cost of goods sold(before adjusting for any overhead variance) was $1,670,000. Required : 1. Calculate the overhead variance for the year 2. Dispose of the overhead variance by ajusting Cost of goods sold.
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.
At the end of the year, Eates Company provided the following actual information:
Overhead $412,600
Direct labor cost 532,000
Estes uses normal costing and applies overhead at the rate 75% of direct labor cost, At the end of the year, Cost of goods sold(before adjusting for any overhead variance) was $1,670,000.
Required :
1. Calculate the overhead variance for the year
2. Dispose of the overhead variance by ajusting Cost of goods sold.
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