Question
ABC Corporation has two production departments, A and B. The company allocates overhead costs based on machine hours in Department A and direct labor hours
ABC Corporation has two production departments, A and B. The company allocates overhead costs based on machine hours in Department A and direct labor hours in Department B. For the current year, the company budgeted overhead costs of $300,000 for Department A and $200,000 for Department B. The actual overhead costs incurred were $320,000 for Department A and $180,000 for Department B. Calculate the overhead cost variances for each department and analyze the causes of the variances. Discuss the implications of overhead cost variances on product costing, pricing decisions, and performance evaluation.
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