Posted: July 12th, 2016

What is the overhead cost?

Perform a financial analysis for the following project. The projected costs and benefits are spread over 4 years as follows: Estimated costs are R100, 000 in year 1 and R25, 000 each year in years 2, 3 and 4. Estimated benefits are R0 in year 1 and R80,000 each year in years 2, 3 and 4. Use an 8% discount rate.

Calculate and display clearly the NPV, ROI and year in which payback occurs.
Overhead is applied on the basis of direct labor hours. Three direct labor hours are required for each product unit. Planned production for the period was set at 8,000 units. Manufacturing overhead for the period is budgeted at $204,000, of which 30 percent is fixed. The 26,200 hours worked during the period resulted in production of 8,500 units. Manufacturing overhead cost incurred was $220,500. Calculate the Overhead spending variance, overhead efficiency variance, and the overhead volume variance. Discuss the over meaning of your results.