Cost Control at IBM

• Values:
  • Total Overhead Costs: $5,000,000
  • Standard Direct Labor Rate: $20 per hour
  • Actual Direct Labor Rate: $22 per hour
  • Production Volume: 100,000 units
• Requirements:

1. Calculate the overhead rate based on direct labor hours for IBM.
2. Analyze the overhead variance and its components (spending and efficiency variances).
3. Discuss how IBM can use variance analysis to improve cost control and operational efficiency.
4. Recommend strategies to mitigate unfavorable variances.