A company operates a standard absorption costing system and has the following results for a month: Budget Actual Sales 20,000 21,000 Production 25,000 24,000 Fixed overhead £100,000 £102,000 Calculate the fixed overhead expenditure variance and the fixed overhead volume variance.
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.
A company operates a
|
|
Budget |
Actual |
|
Sales |
20,000 |
21,000 |
|
Production |
25,000 |
24,000 |
|
Fixed |
£100,000 |
£102,000 |
Calculate the fixed overhead expenditure variance and the fixed overhead volume variance.
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