42,000 Number of units produced..... Actual machine-hours...... Actual variable manufacturing overhead cost. Actual fixed manufacturing overhead cost.. 64,000 $185,600 $302,400
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.
Predetermined
Norwall Company’s budgeted variable
The following information is available for a recent month:
a. The denominator activity of 60,000 machine-hours is used to compute the predetermined overhead rate.
b. At a denominator activity of 60,000 machine-hours, the company should produce 40,000 units of product.
c. The company’s actual operating results were:
Required:
1. Compute the predetermined overhead rate and break it down into variable and fixe elements.
2. Compute the standard hours allowed for the actual production.
3. Compute the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.
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