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If manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead rate variance is favorable, then the standard variable overhead rate exceeded the actual rate.
All ancillary expenses incurred throughout the production process are referred to as manufacturing overhead. Units created during a fiscal quarter are subject to this overhead. All management and marketing operations aren't included in manufacturing overhead. As a result, expenses related to company wages, legal and audit fees, or bad loans are exempted from production costs.
Because it's challenging to link manufacturing overhead expenses to particular products, they're often referred to as indirect costs. In accordance with a predetermined overhead absorption rate, these expenses are added to the finished product. The manufacturing overhead expenses per piece of the activity, such as labor expenditures, labor hours, and labor hours, are known to as the "overhead absorption."
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