1. Compute the variable and fixed overhead allocation rates. Budgeted VOH Budgeted FOH ◄ (AC (AQ ? Act. FOH ? ? ? ? Budgeted allocation 2. Calculate the variable overhead cost and efficiency variances. SQ) Budgeted allocation SC) base base Budget FOH 3. Calculate the variable overhead cost variance. ? = ? = AQ SC = = = = = = = Standard VOH allocation rate Fixed OH Cost Variance Standard FOH allocation rate Variable OH Cost Variance Variable Overhead Efficiency Variance Favorable Unfavora Favorable c Unfavorabl Favorable or Unfavorable
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.
Zeke's Bikes uses a standard cost system and provides the following information:
Standards:
| Static budget variable |
|---|
| Static budget fixed overhead $20,000.00. |
| Static budget direct labor hours 370 hours. |
| Static budget number of units 26,000 units. |
| Static budget direct labor hours 0.025 hours per unit. |
Actual:
| Number of units produced 22,000. |
|---|
| Actual variable overhead $5,150.00 |
| Actual fixed overhead $23,100.00. |
| Actual direct labor hours 510. |
(Round your answers to two decimal places when needed and use rounded answers for all future calculations).
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